Digitalisation offers a range of opportunities for small and medium-sized enterprises (SMEs) to improve performance, spur innovation, enhance productivity and compete, on a more even footing, with larger firms, reflecting: economies of scale; lower operation and transaction costs; reduced information asymmetries; greater capacity for product differentiation, business intelligence or automation; increased customer and market outreach; network effects, etc.

The digitalisation of businesses has continued apace in recent years. Across sectors, firms of all sizes are increasingly equipping their staff with digital tools, although smaller firms do so more slowly, and some sectors do so more quickly. Digitalisation is multi-faceted as it involves the use of different technologies, serving different purposes, and requires a recombination of different strategic assets. Not all SMEs have the capacity to undertake this transformation. The smaller the firms, the less likely they are to adopt new digital practices, and the more likely they are to limit uptake to basic services. Overall, SME digitalisation is strongly related to the way value is created within the firm and the sector in which it operates.

The digitalisation of businesses has continued apace in recent years, but SMEs lag in thetransition, despite potentially tremendous benefits. The stake are high because the SME digital gap has proved to weigh down on productivity and to increase inequalities among people, firms and places. This chapter explores trends and patterns in SME digital uptake, and policies in place to support SMEs in adapting business practices. A first section analyses trends in diffusion across OECD countries prior to the COVID-19 crisis. A second section looks at the impact of the COVID-19 crisis on SME digital transformation, with early evidence and business cases. The last section considers how governments have intended, before and during the COVID‑19 crisis, to support SMEs in going digital.

This chapter covers the key issues surrounding digital security in small and medium enterprises (SMEs). It discusses the challenges raised by the changing nature of incidents, the prevalence and costs of cyberattacks and human errors, and their incidence on SMEs. It highlights the growing exposure of SMEs as digitalisation increases the economic value of data, and their reliance on software code and connectivity. It identifies how the COVID-19 pandemic gave opportunities for hackers to intensify attacks. It looks into SME practices in terms of securing systems and data, and gaps vis-à-vis large firms. Finally, this chapter presents the rationale for better digital security policies, and how governments have attempted to improve risk management amongst SMEs. Initiatives include legislation; certification schemes and education and awareness campaigns to encourage uptake; incentives to develop business solutions and “security by design”; and the mainstreaming of SME policy considerations in national digital security strategies.

This chapter looks at the ability of online platforms, which connect two or more independent sets of users, and enable positive network effects, increase their customer base, reach scale without mass, find innovation opportunities and assets, and access digital solutions and business intelligence services. However, online platforms can also raise risks related to competition distortions, reputational damage, and digital security or lock-ins, especially for SMEs. The chapter explores relatively scarce international data and literature to analyse SME use of online platforms and economic impact. Finally, the chapter highlights how policy action to support SME’s access to, and ensure a level playing field on, digital platforms is currently being mainstreamed by OECD governments, illustrated through six short case studies (Australia, Denmark, France, Korea, New Zealand, United Kingdom).

Blockchain applications for industrial use present distinct opportunities to SMEs. The chapter aims to identify potential benefits blockchain uptake could bring to SMEs as well as foreseeable challenges that could hinder small businesses from reaping the benefits of blockchain adoption. Findings from the OECD country cases studies on “Blockchain for SMEs and Entrepreneurs” in Israel and Italy provide an in-depth analysis of the characteristics and trends of country-specific blockchain ecosystems and industrial use cases. The chapter also provides an overview of blockchain-related policy and regulation trends as well as policy examples aimed at increasing awareness and supporting blockchain innovation activities beyond financial services.

Artificial Intelligence (AI) could trigger a new production revolution, radically transforming business practices and conditions. This chapter aims to provide an understanding of what AI is, its potential impact on SME activities, and barriers to adoption. The first section examines the rise of data-driven AI systems. The second section looks at the implications of these technological changes on SME practices and business environment. It looks at how AI can drive greater efficiency in the SME sector, across different industries and along SMEs’ internal value chain, as well as how AI can improve SME business conditions. The third section discusses how AI diffuses differently within the SME sector, and elaborates on the barriers and challenges smaller businesses face when they consider AI adoption. Overall, this work intends to stress some areas where policy intervention could be considered.

Despite projected gains, the broad diffusion of artificial intelligence (AI) is not automatic, particularly for small and medium-sized firms (SMEs) that face barriers in adoption. This chapter looks at the attention policy makers have been given to SMEs and entrepreneurs in their newly designed AI policy agenda. It looks at the directionality and composition of national AI policy mixes, and aims to identify patterns in public policies and instruments. Through an exploratory text-as-data analysis, this chapter presents the various characteristics of AI policies in place, in particular those targeted towards SMEs and entrepreneurs. The report provides selected country cases illustrating the networks and clusters of governance institutions involved in national AI policies.