Services are the main drivers of economic growth in OECD countries and they are becoming increasingly innovative. This study analyses the role of open services markets in the transfer and diffusion of technology from developed countries to developing countries. It first explores how trade in services increases exposure to foreign technologies. The four modes of supply of services, as defined in the General Agreement on Trade in Services (GATS), are closely interlinked with the main channel of technology diffusion identified in the economic literature. The report then investigates how open services markets can reduce the cost of technology transfer and help to build better absorptive capacities in five sectors (business services, telecommunications, financial services, higher education and training, and logistics services). The last part of the study highlights the productivity gains from services trade liberalisation and the technological spillovers inside the receiving economy. The report shows that emphasis should be placed on services in the debate on trade and growth and that services liberalisation in key sectors, which facilitate the exchange of knowledge between foreign and domestic companies, can have a significant impact on technology diffusion.