Growth rates in digital efficiency are higher than in earlier episodes, with Moore’s Law – the doubling of computer processing capacity every 18 months or so – typically taken as the yardstick for this time being different. Nonetheless, even with Moore’s Law operating, it is only recently that the digital revolution may have reached critical velocity. Perhaps consistent with that, a number of transformative technologies have arrived on the scene recently, including in the fields of robotics, genetics, 3D printing, Big Data and the “internet of things”. 46 These are not new. What is new is their widening application, as they have moved from inventions to GPTs. Economist Brian Arthur has a beautiful metaphor for describing this transition – the transition from a physical (or “first”) economy to a digital (or “second”) economy. 47 He likens earlier industrial revolutions to the body developing its physiological or muscular system. By analogy, the economic system was defining and refining its motor skills, largely through investment in physical capital. The digital revolution is different. It is akin to the economic body developing its neurological or sensory system, defining and refining its cognitive skills through investment in intellectual capital. The success of the recent wave of transformative technologies is built on them creating a neural – brain-like – network of connections. The “internet of things” uses multiple sensors (like the brain’s neurons) connected through the web (like the brain’s synapses) to create, in effect, a machine-brain.
Moreover, they are characterized by low administrative and marketing costs, low employees’ salaries, easiness of procedures within their structure, high effective communications and quick access to information required for work, and the use of non-sophisticated production and operation means. They are also able to adapt to changes, especially in keeping up with consumers’ desires and preferences or change in the structure of labor force or policies of production, marketing and finance, enabling them to overcome economic changes and cycles. SMEs are also characterized by the freedom to enter and exit the market, thanks to their fixed and total assets and liabilities. Finally, they are flexible in geographic spread. Regardless of these advantages, growth and development of SME sector faces a number of challenges that might be greatly similar, not only at the level of a single country, but at the global one as well. The most important of these challenges are the high cost of capital due to high interest rates compared to large enterprises, difficulties in obtaining adequate finance due to lack of guarantees and their modest credit record, inability to compete and influence market forces and utilize economies of scale, inability of applying and facilitating government procedures to expand their activities, humble financial expenditure on development research, non-separation between ownership and management (80 percent of SMEs are run by their owners).