SMEs and the digital divide

• Evaluating the socioeconomic risks of technological stagnation in small and medium sized enterprises

Small and medium-sized enterprises (SMEs) form an integral part of the national and global economy, playing an important role in the circulation of capital and development of the region. In spite of the different criteria for the definition of SMEs, they have generally been defined as non-subsidiary, independent, and autonomous economic entities, where the number of personnel employed is less than a specified number, and they also meet specific criteria for their turnover and balance sheet. In the current scenario, SMEs range from small-scale retail stores and manufacturing enterprises to service providers. However, in spite of their significant role, a large segment of the SME sector is found to be in a state of lag due to the high prevalence of an alarming lack of technological awareness and adherence to outdated and antiquated business practices. In this regard, it is no longer optional but imperative to bridge this knowledge gap for the maintenance of economic vitality in the dynamic and evolving environment.

Adoption of technology

The difference between small and medium-sized companies and large corporations is growing as the latter are increasingly using technology to improve their business operations’ efficiency. Large-scale companies are currently enjoying fast growth through the adoption of technology, such as automation, artificial intelligence, digital payment systems, and effective social media marketing approaches. On the other hand, a large percentage of small and medium-sized companies are still using manual recording of transactions and word-of-mouth marketing, which are no longer effective marketing approaches in today’s digitally competitive environment. The technology gap between large corporations and small and medium-sized companies is posing a number of challenges, such as higher operation costs, slower service delivery, and limitations to the scope of customers’ reach. For instance, small companies without an online presence and digital payment systems are likely to lose their customers to competitors who are offering the convenience of internet-based ordering systems.

The issues affecting the adoption of emerging trends by SMEs are beyond the entrepreneurs themselves; therefore, the problem is a systemic threat to the national economy. Since the labour force of the national economy comprises a substantial portion of these enterprises, their inability to adapt to the changing trends may result in a decline in the labour force and the per capita income of the national economy. A decline in the average household income of the national economy is equivalent to a decline in the amount of expenditure; therefore, the rate of aggregate demand is reduced. In addition, if this problem is left unaddressed, several enterprises that have been part of the national community for a long period of time will be forced to cease operation due to their inability to compete with international brands. The lack of competition will result in the development of monopolies or oligopolies, whereby a handful of large enterprises will dominate the market, thereby affecting the performance of the national economy.

Collaboration

In order to reduce the risks associated with modernisation, it is essential that governments, financial institutions, and relevant authorities work in collaboration to enhance the modernisation process. Strategic interventions may include the development of training programs for business owners, the expansion of internet connectivity, and the provision of financial assistance to upgrade technological infrastructure. Additionally, the use of efficient technology and artificial intelligence may help in the efficient management of day-to-day activities, thereby making modernisation accessible to individuals with little technological knowledge. In addition to the economic benefits, modernisation has a significant impact on the preservation of society and culture. The use of modern technology by traditional artisans and food producers may help them access the global market without compromising their cultural identities.

In conclusion, the non-adoption of the latest technologies by small and medium-sized enterprises (SMEs) is an issue of concern in the contemporary world that requires immediate attention of all the economic stakeholders in the nation. It is evident that SMEs play a crucial role in ensuring the stability of the economy in the long term. Therefore, by actively engaging in the digital revolution of the SME sector of the economy, the nation will be able to achieve its full potential and prosper in the era of modernisation. Failure to act at the present moment may lead to a state of disadvantage for the SMEs in the nation, but the positive outcomes of the integration of the latest technologies are promising.

(The author is a Final Year Undergraduate at Department of Entrepreneurship, University of Sri Jayewardenepura)