The tech industry contributed almost 50 per cent of the European Union's total productivity growth between 2000 and 2004.
The sector is also growing faster than the overall European economy, with the most prolific area of growth being software and IT services, which grew by 5.9 per cent in 2006 to 2007, according to a European Commission (EC) report.
The annual i2010 progress report - the digitally led EU strategy for growth and jobs - said public and private investment in ICT is now "bearing fruit".
The report said technology is fuelling innovation and productivity as part of a fundamental change as Europe moves towards a knowledge-based economy.
This is supported by a huge increase in broadband connections for the year to October 2006, with a record 20.1 million new fat pipes hooked up.
Viviane Reding, EU commissioner for information society and media, said i2010 is starting to pay dividends.
But she warned against complacency, saying the EU and its member states need to work to remove obstacles in the market for online services.
At present, Reding said Europe still can't profit fully from economies of scale due to fragmented regulation which is limiting the ability of tech companies to compete globally.