European economies are failing to maximise benefits of technology investment and need to pay more attention to developing IT skills, innovation and research and development if they are to remain competitive with the US.

A study from the Economist Intelligence Unit claims that, despite years of heavy investment in information and communication technology (ICT), most European economies have yet to see a resulting improvement in productivity and economic growth.

The research said effective use of ICT has helped the US to outperform Europe in productivity growth, despite EU-wide investment in ICT of nearly €1.9tn between 1995 and 2001.

Many European companies find it difficult to use ICT effectively, according to the report. One-third of executives surveyed for the study reported that at least half of their ICT projects failed to meet business objectives.

Senior management's lack of ICT knowledge is the biggest barrier to maximising the benefits of ICT, according to the survey.

"The issue is not a lack of investment in ICT by European companies and governments," said Daniel Franklin, editorial director of the Economist Intelligence Unit, in a statement.

"The research suggests that it is deficiencies in Europe's policies and business practices that prevent Europe from reaching the productivity performance achieved by the US."

The Microsoft-sponsored report said ICT accounts for approximately 0.4 percentage points of the 0.52-point difference in GDP per-capita growth between the US and Germany, France and Italy in 1995 to 2002.

Although the US outperforms all other countries in the quality of its ICT infrastructure, Norway and the UK were found to match the US in development of 'ICT-enabling factors,' while Sweden, Denmark and Finland outperform it.