From the perspective that a region’s industrial development mostly builds upon existing local capability endowments to form a trajectory of related diversifications, we argue that regions with a strong technology-based knowledge-intensive business service (T-KIBS) sector potentially have resource-based relatedness in their ‘knowledge space’ allowing their local manufacturing sector to diversify production more easily towards Industry 4.0. The study assays whether the internal configuration of the local KIBS sector contributes to the economic outcome of local industry by implementing spatial econometrics models on a regionalized database for 24 European Union countries.