3. SMEs in the online platform economy

Online platforms are central in the development of digital economies and societies. In the last decade, they have become ubiquitous, impacting most economic sectors and social dynamics in OECD countries and beyond. Online platforms can be pure intermediaries, direct service providers, employers, lenders, or, indeed, a combination of all the above. It is difficult to overstate their role in the rapid development of the internet economy from a low starting point to the current relevant reach and influence. For example, in the UnitedStates, e-commerce as a percent of total retail sales has grown from 0.6% in 1999 to 16.1% in the second quarter of 2020 (U.S. Census Bureau, 2020[1]). The global COVID-19 pandemic and the related requirements for social distancing has accelerated these trends.

Greater uptake of online platforms is especially important for SMEs. Unlike larger firms, the ability of SMEs to develop internal digital infrastructures that can capitalise on the benefits of digitalisation, is limited by a lack of financial resources and/or skills (OECD, 2019[2]).

Leveraging on online platforms provides scope to overcome size based challenges, and enable SMEs to better benefit from digital transformation. Online platforms offer some obvious benefits to SMEs. They provide a means to access new markets, sourcing channels and a multitude of digital networks. They also provide scope for efficiencies that can drive economies of scale, leverage network effects, and, in turn, boost competitiveness and productivity. Digital technologies can substantially lower many types of cost: search costs, replication costs, distribution costs, tracking costs and verification costs, (Goldfarb and Tucker, 2019[3]). A recent empirical study across 10 OECD countries in four industries in which SMEs are the majority (hotels, restaurants, taxis and retail trade) found that platforms can improve the productivity of incumbents and stimulate movement of workers to more productive firms (Bailin Rivares et al., 2019[4]). Another recent study found that an increase in platform traffic has a stronger positive effect on labour productivity growth for SMEs (Costa et al., 2020[5]).

At the same time, SMEs face challenges in adoption and adapting. Whilst online platforms can circumvent the challenges and costs associated with developing their own internal digital infrastructures, they do not amount to a free lunch. Capitalising on online platforms incurs direct and indirect costs: from the fee structure proposed by platforms, to the need to share sensitive business data and the implicit acceptance to be subjected to matching algorithms on which SMEs have little influence. Vertical integration of platforms (e.g. combining production, advertising and distribution of goods) might also generate conflicts of interest with SMEs which have low bargaining power. Moreover, many “offline” business models have been disrupted by online platforms, creating the need for SMEs to adapt to the changing scenario. Possible anti-competitive practices by online platforms could also threaten fair competition in an increasingly large number of markets, and regulators in many OECD countries are looking closely at this phenomenon.

Many governments are supporting the transition of SMEs towards digital business practices, especially in the context of the COVID-19 global pandemic. Many governments across the OECD have shown an interest in helping SMEs and entrepreneurs to reap the benefits of online platforms. Some have introduced policies that specifically target increasing SMEs’ skills and awareness, engagement in e-commerce, online presence, or increasing capacities to leverage communication platforms for remote working – policies that have become even more important in responding to the pandemic.

This chapter analyses how SMEs across OECD countries are capitalising on online platforms. Using comparable international data the chapter analyses the benefits and the challenges, and provides an overview of the main differences among countries in terms of uptake and usage. The chapter also provides specific national examples of policies being adopted in OECD countries to support greater uptake of online platforms by SMEs, both before and during the COVID-19 pandemic.

In this chapter, an online platform is defined as: “an online platform is a digital service that facilitates interactions1 between two or more distinct but interdependent sets of users (whether firms or individuals) who interact through the service via the internet(OECD, 2019[6]; Rochet and Tirole, 2003[7]). The term “users” is considered here in its wider sense, and includes: not only individuals and firms of all sizes, but also governments, non-profit organisations and other actors in the economy. In the discussion that follows, we consider only those SMEs using non-proprietary platforms as opposed to SMEs that develop their own platforms (Box 3.1).

A central feature of platforms relates to their ability to generate and deliver network effects. Direct network externality can be defined as a change in the benefit that an agent derives from using a good/service when the number of consumers or users of the same good/service increases – e.g. the value for a user of a social network increases with the total number of other users of the same social network. In the common economic literature, most markets with network externalities are two-sided, with particular reference to online platforms and their ability to “get both sides of the market on board”. A more precise definition of two-sided markets is “one in which the volume of transactions between end-users depends, not only on the overall level of fees charged by the platforms, but on the structure of these fees”.

Two key notions derive from the theories of network externalities and of multi-product pricing. First is the idea that end-users do not consider externalities and do not internalise them in their decisions to interact through the platform. To clarify with an example: in his decision to purchase a good, a buyer on an e-commerce website does not generally consider the welfare impact of his or her use of the platform on other end-users (e.g. buying the product could drive the price up for other users if there is limited supply, or drive it down by attracting new sellers). The second is the importance of price structure (e.g. product pricing which defines various prices or discounts in relation to volumes, etc.). Two-sided and multi-sided markets however can also be seen from a different angle, considering the existence of cross-group externalities – the intuitive notion that the net utility of end users (for example, SMEs) on a platform is affected by an increase of the number of members of the other group of end users (for example, customers) in the platform (Rochet and Tirole, 2006[8]).

In OECD and G20 countries the COVID-19 pandemic has caused a surge in the use of online platforms, but this surge has been very heterogeneous across sectors and countries. Online platforms in areas where activities could be pursued without physical proximity (e.g. mobile payments, online marketplaces, restaurant delivery) saw a rise in traffic above 20%. In other areas however where physical proximity is needed to consume the service being provided (e.g. accommodation, restaurant booking and transport) platform use declined sharply (-70%). Countries with more developed digital infrastructure and higher digital literacy saw a steeper increase, suggesting that investing in these capabilities could be a way to increase resilience to future shocks (OECD, 2020[13]). The uneven use of online platforms across countries and regions is also a result of differences in access to digital infrastructure (i.e. fixed or mobile high-speed broadband). This space-based disparity has also a more general impact on digital adoption by SMEs (see sub-section on “Cross-country differences are significant in accessing infrastructure” of Chapter 2).

Online platforms are very heterogeneous in their functionalities, structures and in the services they offer. The definition of “online platforms” considered (See sub-section on “Features and definition” of this chapter) is very comprehensive. However, it makes it difficult to narrow the scope to the most important cases in which platforms modify deeply market conditions (both as opportunities and challenges, see next sections) specifically for SMEs. To give an idea of the wide variety of large active platforms offering their services to different types of end-users, a recent global survey identified 176 platform companies worldwide with a market valuation of USD 1 billion or more (Evans and Gawer, 2016[14]).

Table 3.1 below provides a summary of key business functions that can be carried out by SMEs using online platforms (see also (OECD, 2019[6])2 for a detailed discussion of various typologies of platforms – e.g. functional, user based, data based, revenue sources, and others).

Online advertising is now the dominant form of advertising in many OECD countries, and large online platforms capture most of the market Industry estimates suggest that more than half of worldwide revenues in online advertising in 2019 were attributable to Google (31%) and Facebook (20%), and around 77% if we consider all major online platforms (Alibaba, Amazon, Baidu, Tencent, Microsoft, Verizon, Twitter, Sina) (eMarketer, 2020[15]).

Online advertising offers sizeable opportunities to SMEs: from the global reach to the “targeting” practices based on advanced analytics leveraging users’ information, on which online platforms excel. However, this practice also raises various concerns related to consumer protection3 (OECD, 2019[16]).

The potential access of hundreds of millions/billions of users makes appearing on the search algorithms of the larger search engines or social media platforms a crucial marketing tool for SMEs. In 2019, an estimated 82% of European SMEs promoted their products and services on online search engine platforms (European Commission, 2019[17]). In the United Kingdom, a recent survey showed that 60% of SMEs are currently using paid digital advertising, 67% are using free services, and half of them declared that the current COVID-19 public health emergency has made it even more important for their business. Moreover, 63% of the SMEs that do use these paid services are convinced that it has a good return on investment in terms of generating sales. The same research suggests that up to 45% of all digital advertising spending in the United Kingdom is accounted for by SMEs (IAB.uk, 2020[18]).

Small firms selling online are more likely to sell on online platforms (35%) than medium-sized (29%) and large firms (23%) in the EU28 (OECD, 2019[19]). SMEs deciding to outsource e-commerce functions, can rely either on the few extremely large providers on which they can sell all kinds of products (e.g. Amazon (eBay (183 million users) - or on smaller specialised online marketplaces focusing on specific types of goods (e.g. Yoox or Zalando for fashion, BloomNation for flowers, GOAT for sneakers, Chrono24 for watches, etc.). The scale of a platform’s network plays a crucial role for both large and smaller specialised platforms, as it enables the direct and indirect network effects creating value for SMEs joining the network (Holland and Gutiérrez-Leefmans, 2018[20]). While the network of large players is obviously bigger and more diversified in general, some specialised platforms can compete by offering access to a deeper network of end-users in a specific industry/sector.

One key element for SMEs is that online marketplaces enable them to trade across regions and countries and provide a wide range of complementary services (e.g. logistic, data analytics). This happens in both developed and developing economies (OECD/WTO, 2017[21]; ITC, 2016[22]). It is estimated that around 300 000 SMEs registered in Amazon’s “marketplace” in the United States were exporting to other countries in 2017 (OECD, 2019[6]). Another important aspect is that they often offer a wide range of complementary services that are particularly attractive for SMEs lacking resources: logistic, customer services, SaaS, data analytics (OECD, 2019[19]). Data analytics offered to SMEs often rely on advanced machine learning algorithms, creating an avenue for SMEs to access frontier knowledge and technology that would have been out of reach if they had to conduct developments with their limited internal capacity (see Chapter 6 on AI and SMEs).

“Aggregators” are platforms that allow incumbent service providers to reach their potential customers more effectively (Bailin Rivares et al., 2019[4]). These platforms do not create a new market but do make matchmaking in the existing market more efficient thanks to the network effects. This is particularly relevant for SMEs as they have less resources to invest in traditional advertising and reach out activities.

Two interesting examples come from the restaurant and hospitality industry:

  • In the first, online platforms (e.g. Deliveroo, Door Dash, Uber Eats) have provided scope for restaurant owners to access many more clients than they were previously able to. By taking care of advertising, software and mobile applications, customer care and the whole logistics of the delivery service, they have transformed the food delivery industry. Market estimates suggest that the global market reached USD 85 billion in 2018 and is set to double its value by 2025 (Forbes, 2019[23]). During the COVID-19 pandemic this industry has accelerated its expansion and offered a lifeline to many restaurant owners who saw their conventional (non-delivery sales) disappear during lockdowns.4

  • In the second, online platforms are able to offer a well-structured “catalogue” of hospitality service businesses (e.g. hotels, Bed&Breakfasts) to potential customers. SMEs have a very strong incentive in appearing on such platforms (e.g. Booking.com), as their global geographical reach, standardised and intuitive reservation system and extensive “traveller reviews” repository makes them very successful among travellers.

In creative industries, content delivery is increasingly shifting towards online platforms, matching creators of content with consumers. For large and small producers of movies or TV series, it is now very important to offer their products on online platforms that are coming to dominate the market (e.g. Netflix, Hulu, YouTube, HBO, Amazon Prime Video, Disney+). An even more compelling case is the one of game producers, as consumers access their products by design through platforms which might have a physical terminal (e.g. consoles like Sony PlayStation, Microsoft Xbox), but not necessarily (e.g. games for PC or Mac on Steam, Epic Games Store, Battle.net; e.g. mobile games on Apple Store or Play Store on Android).

“Disruptors” platforms create new markets, by bringing in new service providers and increasing competition for incumbents in the same industry. For example in the hospitality industry, the most disrupting of such services has been Airbnb, which allows anyone who has a spare room/apartment/house to rent it out directly on the platform. The growth of this online platform has allowed many new self-entrepreneurs to enter the hospitality market, increasing competition but also allowing some existing SMEs (e.g. B&Bs) to reach a much wider set of potential clients.

In recent years, a number of online platforms have entered the market to provide SMEs with easier access to financial institutions and indeed finance from non-traditional sources. SMEs might decide to use these types of platforms for their greater transparency, security and ability to lower information asymmetry with finance providers. An example is Germany’s Campeon, a tech start-up connecting data and financing requests from SMEs with large companies, banks, equity investors, guarantors, innovation support agencies, and public and private databases (OECD, Upcoming[24]). A growing avenue of SME financing is “Peer-to-peer lending” and “Crowdfunding”, with some online platforms connecting SMEs to retail investors willing to finance directly their projects (e.g. Kickstarter, GoFundMe Lending Club, Funding Circle). This way of soliciting funds from the public through an online platform is still relatively small: the biggest market for “online alternative finance” is in the People’s Republic of China,5 and it accounts for 0.36% of GDP, followed by the United Kingdom (0.2%), Estonia (0.2%) and Israel (0.18%) (OECD, 2020[25]).

Some large online marketplace platforms have also started to offer financing solutions directly to SMEs. Among the largest online marketplaces, Amazon, Alibaba, or MercadoLibre have developed a full set of financial services for SMEs operating on their platform (e.g. working capital loans, payment services, trade financing, and more). These players can leverage the large amount of data SMEs generate while operating on their platform for credit risk assessment, and are able to provide them convenient financial products without the need to partner with banks or traditional financial institutions.

Some platforms leverage distributed ledger technologies (blockchain) to provide decentralised access to KYC6 information to financial institutions and trading companies (e.g. Komgo SA, using the Ethereum chain). Other banks and financial institutions are testing the decentralised infrastructure of R3’s Corda: the very innovative idea here is that clients (SMEs and private citizens) maintain self-sovereignty over their data, managing their own identities and the amount of information shared with each bank. Marco Polo is another platform based on Corda which specialises in trade finance and supply chain financing. We.trade, another platform directed to SME buyers and sellers, is facilitated by 12 European banks, and clears SMEs for KYC compliance (based on Hyperledger Fabric; (OECD, Upcoming[24])).

SMEs might decide to use online platforms to receive and make transfers for their products and services. Incumbents as VISA or MasterCard offer this kind of service providing the platforms for their network of merchants (including thousands of SMEs) to be paid by card-holders.

SMEs can also decide to open corporate accounts on new digital payment platforms that offer online payment services. These platforms allow them to connect for instant-payments with their vast network of users. Examples of such platforms are PayPal, Square or Revolut, which allow customers to pay via extremely streamlined and user-friendly mobile applications on their phones.7

SMEs also use online digital platforms for many of their communication needs, as the most common ones offer attractive network effects with hundreds of millions of users and usually free service. Instant messaging (e.g. Whatsapp, Telegram, Skype), web conferencing (e.g. ZOOM) and hybrid services offering “workspaces” integrating both services (e.g. Slack, Microsoft Teams, Google Hangouts) have become widely integrated in business practices worldwide.

When forced to avoid direct personal contact during the COVID-19 pandemic, SMEs have heavily resorted to these online platforms to keep up their operations. Communication platforms have become even more critical in maintaining relations between suppliers and clients across value chains, not least because of their scope to enable teleworking. Obviously, the share of workers that can perform tasks remotely varies widely across sectors, so the value of using such online platforms differs between SMEs. For example, around 37% of EU-27 employees are in “teleworkable” occupations, but this share varies from 10-15% in agriculture, forestry, fishing, and construction, to more than 90% in financial and insurance activities (European Commission, 2020[26]).

The importance of online digital platforms for innovation has been discussed in the literature of information system (e.g. (Evans, Hagiu and Schmalensee, 2008[27])). One key point is that continuous innovation in the internal structure and technical functioning of digital platforms has an effect on how businesses leverage them for innovation, making the two concepts closely interconnected (Yoo, Henfridsson and Lyytinen, 2010[28]). In other words, it is complicated to decouple the technical side of innovation on digital platforms (analysed in Information System literature) and their economic effects on businesses, as one cannot be understood without the other (De Reuver, Sørensen and Basole, 2017[29]).

One relevant case of innovation platforms is the digital applications marketplaces, or “App stores”, on which SMEs (app developers) build and offer their products. These products are built from the beginning respecting technical standards and leveraging the core functionality of the “app marketplace”,8 with a view to being specifically commercialised in the marketplace and accessible to mobile users. The iOS and Android ecosystems, integrating the App Store and Play Store platforms, are the two most important cases in terms of number of mobile users globally and number of apps supported (respectively around 2 million and around 3 million apps in Q3-2020): they offer application programming interfaces and software development kits, alongside the access to their extremely large and ever-growing user-base.

Another important role of online platforms is that they allow for open innovation9 to blossom. The openness of a digital platform architecture allows developers and programmers to access APIs, providing an environment in which there are few barriers to the creation and development of innovative knowledge products (Nambisan, Wright and Feldman, 2019[30]). As an example, GitHub has gathered 40 million programmers and software entrepreneurs globally to interact with each other, creating over 44 million repositories of code (GItHub, 2020[31]) to adapt existing products and develop new ones (e.g. business applications, website functionalities, games). There are advanced technology applications applied to online platforms that bring interesting results as well. For example, researchers have found that Artificial Intelligence (machine learning algorithms) applied to machine translation on an online marketplace has increased international trade (by users including both individuals and firms) on the platform by 10.9% (Brynjolfsson, Hui and Liu, 2019[32]).

Network externalities are among the most defining features that characterise online platforms (OECD, 2019[6]). In economic theory, it is widely accepted that network externalities imply that the usefulness of a platform is directly correlated to the size of its user-base. However, there is a distinction to be made in discussing two-sided (or multi-sided) online platforms, as considered in this paper. As these platforms serve different sets of end-users, network externalities can be either (Katz and Shapiro, 1985[34]; Shapiro and Varian, 1998[35]):

  • direct - if the value of accessing the platform for the user increases at the increase of the number of users in the same set of users

  • indirect – if the value increases at the increase of the number of users in the other (different) set of users.

For SMEs, the interplay between direct and indirect network effects depends on the type of platform they choose. When an SME decides to join a platform, incentives differ in relation to the type of platform. It can be argued, for example, that the most obvious incentive for an SME to sell products on an online marketplace is to connect to a larger number of clients beyond its current physical and geographical reach (positive indirect network effects). However, the presence of a large number of other SMEs selling on the platform (direct network effects) can be both positive and negative. It can attract even more potential clients (as it increases the positive indirect network effects for consumers who can access a broader and potentially more diversified offer on the platform), thus increasing the positive indirect network effects for the SME and starting a virtuous circle. The presence of more SMEs on the platform can also help improve the offer of services to SMEs by the platform, as the higher their number, the more the platform will be able to optimise and continuously improve its offer through client-feedback and demand-screening.10 However, the presence of more SMEs on the platform also increases the level of competition from other SMEs, which could reduce profit margins and ultimately make the presence on the platform unattractive.

Often platforms are willing to lose money (e.g. by keeping prices artificially low, by cross-subsidising one set of end-users, by investing very heavily in advertising, etc.) in order to increase the overall number of users and “ignite” the virtuous circle of direct and indirect network externalities. While some platforms fail to achieve scale and disappear, in other cases this is a sound business strategy as it allows the platform to become profitable at a later stage, once it achieves a dominant position in the market, but profitability is not guaranteed (Cusumano, 2020[36]). An interesting and very well-known example is Uber. Uber disrupted the taxi sector by proposing an efficient and secure platform to get alternative transportation services at competitive and flexible rates, especially in large cities. Since its foundation in 2009, while its user base and revenues have grown at a very fast pace, it has yet to generate a profit.

A large user base is key to unlocking the network effects that make platforms attractive for SMEs. The larger the user base, the more likely for them to find a match (e.g. with service providers, suppliers, clients) reducing transaction costs and information asymmetry. In some cases, platforms can leverage their large user base to attract even more users by integrating additional separate functionalities. For example, the review and rating systems in online marketplaces (which grows in effectiveness with the growth of the user base) generates a positive direct network effect for customers, incentivising more to join (Belleflamme and Peitz, 2018[37]). If we look at online marketplaces, ancillary services as review and rating systems, platform insurance on purchases and refunds, as well as guarantees on delivery times and logistic, greatly increase the trust of consumers, making it more likely for an SME to be able to sell to them via the platform than through its own app/website.

Network effects permit online platforms to unlock access to digital services at very low costs for SMEs. Platforms are able to scale and increase their user base at incredible speed as the marginal cost of adding a new user becomes virtually zero after the initial sunk costs (hardware and software) are undertaken (Brynjolfsson et al., 2008[9]). To use again the Whatsapp example, the platform passed from 50 employees serving 200 million users at the beginning of 2013, to 55 employees serving 420 million users at the beginning of 2014 (Olson, 2015[38]). This consideration is very important in our perspective, as the platform’s cost structure has an effect on its users as well. In most online platforms, the marginal cost of adding a new user is close to zero, but it is fundamental to reach scale. Thus platforms have a strong incentive at offering SMEs the opportunity to externalise business functions for a fraction of the cost they would have incurred if they had to perform them on their own.

Another core characteristic of online platforms is that they allow SMEs to interact with other end-users across regional and national borders, and trade at a global level. SMEs are primarily local actors and have usually more difficulties in participating and benefit from Global Value Chains (OECD, 2019[2]; López González, 2017[39]). SME internationalisation has generated a very large and fragmented body of research over the last 25 years, but digitalisation is seen as possibly the key strategic means for SMEs to reach international markets by lowering trade costs and easing access to foreign markets (Morais and Ferreira, 2020[40]; OECD, 2018[41]). Online platforms are key for the digitalisation and internationalisation of SMEs, as they provide the technological and logistical infrastructure to match buyers and sellers and deliver their products and services, but also manage firm-consumers relationships and firm reputation (Nambisan, Wright and Feldman, 2019[30]). Online platforms have also led to a rising number of small packages being sold across international borders, by connecting SMEs and individual clients across borders (OECD, 2020[42]).

In addition, platform services accessed by SMEs are often tailored to them and relatively “easy to use”, so that the skill gap is less of a barrier. To ensure the continuous increase of their user base and of their users’ engagement, platforms’ services must be as “user-friendly” as possible. This implies that almost any person working in an SME, without particular training, should be able to use at least the basic features of the platform. On top of this, large online platforms usually offer free online courses and tutorials catered specifically to SMEs to explain how to exploit all the features of the platform more effectively.

Online platforms stimulate innovation in business models and products for SMEs and entrepreneurs both in “digitally intensive” sectors11 as well as in traditional ones. Online platforms, with their easy access to large networks and effective matchmaking systems, create important opportunities for SMEs willing to innovate and adapt their products and business models. This happens both in sectors where technological innovation is core and in those where it is not. Direct network effects are a key factor in this environment focusing on software development.

In less “digital intensive” sectors, such as restaurants, food delivery platforms (e.g. Deliveroo, DoorDash, Seamless) have accelerated digitalisation especially for “take-away” services. In the context of the pandemic, this ongoing process has accelerated rapidly, with a transformation that was expected to take years to happen in just a few months. It is estimated that the market for food delivery in the United States reached USD 45 billion in 2020 (10% more than the previous estimate) and 16% of the addressable market by 2022, instead of by 2025 (Morgan Stanley, 2020[43]). This has pushed product innovation (e.g. proper packaging for delivery with insulation and advertising, digital terminals in the kitchen to track orders, web advertising on platforms) in a business that might have not felt the pressure to change before.

Empirical research suggests that online platforms increase productivity in hotels, restaurants, taxis and retail trade; sectors in which there is an overwhelming presence of SMEs. A study across 10 OECD countries (Belgium, France, Germany, Hungary, Italy, Poland, Spain, Sweden, United Kingdom and the United States) leveraged data from Google Trends and business micro-data from Orbis to assess the impact of online platforms on productivity. Results averaging the effects on all four industries, point to a significant increase in multi-factor productivity (Figure 3.1), with a stronger effect in countries where platform development is considered higher. This effect comes from “aggregator” platforms, while “disruptors” have no significant effect on the productivity of existing service providers (Bailin Rivares et al., 2019[4]).

Impact on firms’ productivity from the use of online platforms appears to be more important the smaller the size of the firm. In OECD countries, in firms with less than 10 employees a one-standard deviation increase in traffic on platforms is associated with a boost of more than 10% of labour productivity growth. On the same premise, a positive but more limited boost is seen also for companies with 10 to 50 employees (~7%) and 50 to 100 employees (~6%) (Costa et al., 2020[5]).

There are multiple challenges that SMEs face in using and trading on online platforms. With the increasingly central position of online platforms in the development of the digital economy, issues span from consumer protection to data privacy, from competition to transparency.

Both to avoid being “disrupted” by online platforms and to use them in the most effective way, SMEs might need to invest in skills development and change their value proposition/business model. Notwithstanding the fact that for some SMEs e.g. restaurants (as shown above) only limited skills are needed in capitalising on platforms, this is not universally the case across all SMEs and sectors. Traditional business models are not necessarily ready to be “transferred” online, and the entrance of business platforms in a market might be so disruptive as to make business models obsolete in a very quick fashion. Many businesses need to introduce and implement innovation in order to make their businesses “digitally ready”, especially because to exploit the opportunities provided by online platforms they need adequate internal digital processes. But this means dedicating the resources for complementary investments, for example in skills development and organisational change. There are usually multiple private (Amazon, 2020[44]) and public (European Commission, 2020[45]) programmes available for free, or at a very low cost, for SMEs to embark on this transition. However, decision makers in the enterprise could lack the motivation to dedicate resources and time to transform their business model.12

Competition authorities are looking at possible anti-competitive behaviours arising from platforms. Online platforms maximise profits based on interlinked demand from the two (or multiple) sets of end-users connected in the platform. The winner-takes-all and winner-takes-most effects Box 3.1, resulting from the particularly strong network effects in this market introduce a risk that platform providers could wield their market power and abuse their dominance status, thus distorting competition. (OECD, 2020[46]) presents the main types of abuse of dominance that can be found in digital markets, which encompass digital platforms (Box 3.5).

Anti-competitive behaviours by platform providers can harm SMEs using the platforms. 13 Distortion in competition conditions does not allow SMEs to operate on a level playing field. Algorithmic price-setting,14 results of search algorithms, and platforms competing with their own products against SMEs on the same platform are all areas of scrutiny by public authorities (Khan, 2017[47]).

Consumer protection on platforms is relevant for SMEs as well, especially in e-commerce. In 2016 the OECD published the Recommendations of the Council on Consumer Protection in E-commerce (OECD, 2016[48]) stating that some expansion of the traditional consumer protection principles (e.g. fair business, advertising and marketing practices) should be applied when dealing with e-commerce platforms. In particular, as many services are offered for free, non-monetary transactions should be considered more carefully. For example, the trust-building system based on ratings, reviews and customer services should be managed in full transparency to ensure that consumers as well as “sellers” operating on such platforms are treated fairly.

On another side, platforms increase competition for SMEs that were previously exploiting small “rents” based on the local networks. Allowing customers to access providers that can be based anywhere makes many corner shops, restaurants, local entrepreneurs (painter, plumber, gardener) less insulated from competition. While this might have a productivity-enhancing effect in aggregate, it might also introduce an additional challenge for many SMEs. For example, a restaurant that was before serving people leaving in its surroundings becomes less exclusive once food delivery apps become widely used. In this sense, the lack of visibility on such apps might erode even local markets, “forcing” somehow SMEs to establish an online presence on them.

SMEs provide platforms with a large volume of sensitive business information, thus transparency in the use of such data are essential. To operate on platforms, SMEs usually agree to contractual terms and conditions that usually give online platforms the right to use the data they gather as they see fit, for example by selling them to third parties that remain unidentified by SMEs. Often SMEs do not really have a choice as some of the largest platforms are in dominant positions. Regulators around the world are tackling the issue, trying to give more say to SMEs and consumers over the data they generate with their commercial behaviour. In this sense, the General Data Protection Regulation (GDPR) in Europe is one of the most advanced examples at the global level.

As sensitive information is stored on online platforms, SMEs have an interest in their cybersecurity standards. SMEs trust online platforms with business data (e.g. on sales, supply channels, client base) that have crucial importance. There is a need for SMEs to fully understand the scale and scope of the data they share, to better assess the inherent risks – but often SMEs lack the skills needed for this task (Chapter 3).

Another critical aspect of the use of platforms by SMEs is the high switching costs and the difficulty in multi-homing. As platforms profit from the size of their network and the volume of data gathered, stored and managed, it is a clear business objective to retain client SMEs and avoid their passage to other platforms. This is done by offering attractive conditions and constantly upgrading and enhancing the services offered, but also by making it difficult to transfer data (e.g. transaction history, contacts, logistical information) from one platform to another. So that the more a business uses a platform, the more it has to lose if they decide to switch to a competitor. These barriers introduced by some platforms make data transfer more costly, hindering multi-homing (i.e. the use by SMEs of multiple networks at the same time) (Park, Seamans and Zhu, 2017[49]). A relevant example of lock-ins on both sides of the two-sided market is in the gaming industry, where the high prices of consoles and subscription services, such as Xbox Live and Playstation Plus reduce players’ incentive to multi-home – while exclusive contracts oblige content developer to sell their product exclusively on one platform (Zhu and Iansiti, 2019[50]).

A full understanding of the current use by SMEs of online platforms is a non-trivial task, reflecting the current state of official statistical information systems in the field of the digital economy. Although significant efforts are being made on this front (OECD, 2019[51]; OECD, 2020[52]; OECD, WTO and IMF, 2020[53]) it will be some time before comprehensive and internationally comparable data15 begins to materialise, especially data that provide a view of SME uptake.

That being said, the current information tool kit does include some data sources that provide insights into two important dimensions: e-commerce and use of social media platforms. Although it’s important to note that these sources do not yet cover micro-firms (i.e. firms with less than 10 employees, who account for 90% of the total business population in OECD countries, employing one person out of three on average (OECD, 2019[2]) (see Chapter 2 on SME digital uptake).

In e-commerce it appears that business participation is positively correlated with firm size, also reflecting the SME lag in digitalising business processes and practices. Figure 3.2 shows the participation in e-commerce of businesses broken down by size in OECD countries in 2017 and its development since 2008. The gap between large and small business is evident across all countries considered, as is the growing importance of e-commerce.16 On the OECD average, e-commerce was used by 16% of all firms in 2008, compared to 44% of large firms and 21% of small firms in 2017, albeit with a wide variation between countries. In New Zealand and Australia for example SME uptake of e-commerce was higher than uptake of larger firms in most other OECD countries.

Businesses can decide to sell online by building their own website/app, by leveraging online marketplace/platforms, or both. As discussed earlier in this chapter, online platforms dedicated to e-commerce (“marketplaces”) offer integrated solutions for SMEs at relatively low cost, allowing them to leverage positive direct and indirect network effects and offering complementary services, but at the additional cost of sharing sensitive data and facing strong competition. For many SMEs that decide to build their own website with e-commerce capabilities, costs might be high as they do not necessarily have employees with the necessary skills.

On average, the share of SMEs using their own website for online sales is higher than that of companies using online marketplaces (Figure 3.3). In OECD countries within the European Union, in 2019 on average 15% of all small enterprises sold their products online via their own website, while 6% sold on online platforms/marketplaces. Among medium-sized enterprises, these values were respectively 20% and 7%. The two options are not mutually exclusive.

On average, a bit less than a third of small firms and a fourth of medium-sized firms selling online make at least 20% of their sales on online marketplaces. Among European OECD countries, around 5% of all SMEs sell online and make at least 20% of their sales on e-commerce platforms. But if, instead of looking at the whole heterogeneous SME population, we look only at the sub-set of businesses selling online, data show that 29% of small businesses make at least 20% of their sales via e-commerce marketplaces, compared to 24% of medium businesses (Figure 3.4). In Italy, online marketplaces are important for all SMEs, but particularly so for small (58%) rather than medium (37%) businesses; in Turkey, the role of online platform is extremely important for both small (56%) and medium (52%) firms; while in Ireland, online platforms are more relevant for medium (37%) than small (24%) firms.

Disproportionally fewer SMEs have cross-border e-commerce sales. Figure 3.5 shows that out of the (average) 20% of small businesses with e-commerce sales, nearly all sell within their own economy (i.e. very few serve only foreign markets) but less than half (8%) sell in other EU countries and an even lower share (4%) sell outside of the European Union. A similar trend can be observed for medium-sized firms, where out of the 30% of companies selling via e-commerce, only half (15%) sell in other EU countries and less than a third (8%) sell outside of the European Union.

The COVID-19 pandemic has strongly accelerated the expansion of e-commerce in 2020. Social distancing rules have moved companies and consumers increasingly online over the year. For instance, in the United States, the share of e-commerce in total retail sales jumped from an average of 10-12% in the period spanning from Q1-2018 to Q1-2020 to 17% in Q2-2020. In the United Kingdom, the increase over the same period was even sharper, with an increase from 18-20% to 32%. In the EU-27, retail trade turnover contracted by almost 10% in March and by almost 20% in April 2020 before turning back to similar values of 2019 in May, June and July. In the same period, retail trade via e-commerce rose by 10% in March, 30% in April, 40% in May, 30% in June and 20% in July with respect to the same months in 2019 (OECD, 2020[56]).

On average in the OECD more than 50% of small businesses are using social media. The definition used for social media here is “social networks, blogs, file sharing, wikis” (OECD, 2015[57]), which makes it relevant for the definition of online platforms considered herein. As described earlier, social media can have a positive impact on the financial performance of SMEs, as well as on cost reduction on marketing and customer services, improved customer relations and improved information accessibility (Ainin et al., 2015[58]; Chatterjee and Kumar Kar, 2020[59]).

In the OECD, the share of businesses using social media has steadily increased over the past decade. In 2013, on average across OECD countries, less than a third of small businesses (29.9%) used them compared to more than half (55.8%) in 2019. This consideration holds for medium businesses (from 36.6% to 65.4%) and large businesses (from 47.6% to 79.2%) as well (Figure 3.6). However, different types of social media have different user growth dynamics. For example, in the European Union from 2013 to 2019 there has been a marked increase in the share of businesses using “social networks” (from less than 30% to more than 50%) and a doubling in the percentage of users of “Multimedia content-sharing websites” (from 10% to 20%). In the same time-span, the use of “Enterprise blog or microblogs” (around 10%) and “Wiki-based knowledge sharing tools” (around 5%) has remained stable (Eurostat, 2020[60]). However, there is a strong cross-country variability in the use of social media by firms: while in the five countries with the most use, more than 70% of small companies and more than 80% of medium-sized companies operate on social media, in the bottom five less than 45% of small companies and less than 60% of medium-sized companies do.

The use of online platforms is a matter of internal skills capacity, an issue of particular concern for SMEs. The cost of setting up a social media profile and/or e-commerce account on a large platform is usually very low. Most of the platforms have a “free to use” model, while others offer their services for relatively small fees. These “basic accounts” are also usually designed to be extremely user friendly and do not require particular skills to be operated. However, if they want to unlock all the potential of the online platforms they are using (in terms of network effects, cost reductions, etc.), SMEs need to develop particular skills and capabilities to move operations online and concretise the opportunities available to them. While many SMEs have social media accounts, studies suggest that many of them do not fully exploit their potential. In particular, the lack of skills for strategic planning, measurable objectives and clear assessment of needed resources impedes most SMEs from achieving positive Return on Investment (McCann and Barlow, 2015[61]). For instance, any employee can set up a social media account and put some basic information about the company and its products online without the need for any particular skill. But if the company wants to really gain from its presence on the platform, it needs to increase traffic, reactions, network, impressions – a non-trivial task that requires knowledge of the functioning of the sorting algorithm on the platform and the set-up of a media strategy. This can be achieved through internal training or by hiring specialised professionals (e.g. social media manager). Figure 3.7 we show that there is a relatively clear correlation between the level of ICT training for non-ICT specialists provided in-house and business use of social media in OECD countries, the former being also related to the level of adult digital literacy in countries (OECD, 2019[2]).

A higher share of firms promoting ICT training seems to be associated with an increased share of firms using social media, and increasingly so the smaller the firm is. As shown in Figure 3.7, expectedly both the share of firms using social media and providing ICT training rises with the size of the firms. In addition, a simple regression model shows that across the countries in the sample there is a relatively strong correlation (R-multiple = 0.7) between the share of firms using social media and the share of firms providing ICT training for their staff. The relation is stronger for smaller firms, where an increase of 1% in the share of non-expert employees accessing ICT training is correlated with an increase of 1.1% in the use of social media. The relation is still positive but less strong for medium-sized firms (0.7% increase) and large firms (0.5%).

Governments are offering a range of support policies to encourage SME uptake of online platforms. However, it should be noted that the diffusion of online platforms varies widely across countries and regions for both structural and policy reasons. OECD research shows that a country’s structural characteristics (socio-economic and demographic features, the digital preparedness of the population, and platform concentration in different sectors) as well as its structural policies (freedom and rule of law, product market regulation, and digital service regulation) have an impact on both the number and the average size of platforms operating in the country (Costa et al., 2020[5]).

Governments are beginning to introduce awareness campaigns and policy action targeting online platforms specifically. Below is an analysis of six country case studies of approaches used by national governments to support SME uptake of online platforms: covering Australia, Denmark, France, Korea, New Zealand and the United Kingdom. These OECD countries have been selected as they all have devised policies with an explicit focus on online platforms and on their use by SMEs.

An analysis of official documents shows that in some cases, these policies are generic, designed for the business population at large, and, so, implicitly targeting SMEs. The policy initiatives selected from Denmark, France, Korea and New Zealand are targeted specifically towards SMEs, but also include policy tools created for firms of all sizes. Australia and the United Kingdom do not have specific SME initiatives, but rather policies to encourage the use of online platforms by all businesses.

Policy initiatives are targeted towards firms operating in all sectors, but most are relevant for those operating in the retail sector. Currently, a number of governments target e-commerce and SME business functions related to marketing, sales, advertising, branding, customer services and external communication (Table 3.2). Accordingly, firms operating in the retail sector are the most likely to benefit from the support offered.

Policy makers seem to focus on certain types of online platforms, especially those with strong positive indirect network effects, where SMEs can interact with a higher number of other end-users (notably individual consumers), and less on service delivery platforms (aggregators or disruptors). There are few SME policies for the use of online platforms for “financing” and “innovation” which could be explained by the alternative measures governments already have in place in these areas (OECD, 2020[25]; OECD, 2017[62]). Overall there is limited evidence on how these types of platforms can benefit SMEs, and the role of public policies in the field. There are some examples of policy actions, for instance in Mexico, where in 2018 the government allocated MNX 10 million to the project “Crowdfunding Ecosystem Acceleration in Mexico to Promote Entrepreneurship, Innovation and Economic Inclusion”, to connect SMEs and retail investors in the country (OECD, 2019[63]).

Policy intervention is mainstreamed across different government ministries and agencies that have responsibility in the field, with the modalities of policy implementation depending largely on the goals pursued. For example, in the context of a national digital strategy, as seen in Australia, the Ministry of Science, Technology and Innovation is often responsible. Similarly, if the initiatives are part of a business community at large or small business specific policy, it will be the Ministry for Business or Ministry for Small Business that is responsible. This is the case in Denmark, France and in Korea. Interestingly, as seen in the United Kingdom, e-commerce policies are often created in the context of exports, which fall under the responsibility of the Ministry for International Trade. Whilst, the aims and focuses of such policies are often influenced by the body responsible for their execution, there is also room for shared responsibility, as seen in Korea with the e-commerce export policy being a joint venture between the Ministry for SMEs and Start-ups and the Ministry of Trade, Industry and Energy, and in Denmark where the Ministry of Industry, Business and Financial Affairs jointly administrates with the Ministry for Foreign Affairs an export promotion initiative for e-commerce.

Governments are promoting programmes in co-operation with some of the largest online platforms. For many SMEs, to digitalise means to start using the services offered by the main global online platforms. In France, Korea and the United Kingdom (Box 3.10), (Box 3.11) and (Box 3.13), co-operation between government and the providers of such online platforms, specifically e-commerce and advertising platforms, help support SME internationalisation, SME awareness of digital solutions, national brand recognition, as well as SME resilience – particularly important in the current situation - through diversification of revenue sources.

As part of the policy responses to the COVID-19 crisis, a number of government initiatives have aimed to accelerate the digitalisation of SME operations, including on online platforms. For example, Australia is providing businesses with information on how to make the best use of social media platform (Box 3.8), while Korea is encouraging brick-and-mortar shops to open their business online through a dedicated support programme, also to access foreign online platforms to sell their products abroad (Box 3.11). Japan has offered subsidies to support firms to adopt IT solutions and develop e-commerce sales channels. Broader support programmes for SMEs, such as the France Numérique initiative also helped SMEs transition to an online business model (Box 3.6). Some countries, e.g. Mexico and Turkey, also promoted solidarity campaigns to provide SMEs with essential cash flows during the COVID-19 crisis and directly encouraged online sales on e-commerce platforms. Other countries helped SMEs with access to essential services related to their online business model, e.g. e-customs processing (Switzerland) and strategic consulting to strengthen SME’s online presence on international markets (Spain) (OECD, 2020[64]; OECD, 2020[65]).

In the context of COVID-19, support has been targeted at increasing e-commerce and advertising capabilities (including through online platforms), and enabling SME use of communication and remote working platforms. For instance, the French government launched a call for large digital platforms to provide small shops with access to free or discounted services in order to help them face the crisis. Respondents included platforms active in e-commerce, e-payment, delivery/logistics, search marketplaces, communication. In another example, the Chinese Ministry of Industry and Information Technology introduced “online operations” programmes to help SMEs sell online through Alibaba and JD (the two major Chinese e-commerce platforms), and to allow them to reduce costs, increase sales and thus stabilise employment (OECD, 2020[65]).

National and sub-national governments are allocating further resources to encourage SME activities on online platforms, particularly for teleworking and e-commerce. These policies tend to be targeted at assisting SMEs in increasing their “work from home” capabilities or encouraging e-commerce capabilities (including through the use of online platforms). For instance, the regions of Lombardy and Friuli Venezia Giulia (Italy) have provided financial contributions to support companies and self-employed workers to work remotely in response to the pandemic. The contribution can be requested to cover both the training costs as well as the costs for the purchase of the digital tools/subscription to digital platforms for teleworking (OECD, 2020[66]).

Some OECD governments have introduced freely accessible public online platforms to support the digitalisation of SMEs. To facilitate the use of such portals, SMEs can directly select the business function they want to “digitalise” to be directed to a consultant that might help them in the transition (Box 3.6). There have also been more general reflections on how the government could itself become a “platform”, creating and maintaining the infrastructure where businesses and citizens could match with public service providers (Box 3.7).

The six OECD country cases below have in common the introduction of policies specifically aiming to SMEs’ uptake of online platforms. Concrete measures spans from vouchers to hiring consultants to help develop e-commerce capacity to how to guides on using social media for promotion and advertising, from marketing training to business managers to target specific overseas market with e-commerce, to self-assessment tools for businesses to track and monitor their ability to use online platforms. In the following cases, the most common policy objective is to increase SMEs’ general digital skills, technology awareness and adoption.

This chapter looks at the main characteristics of online multi-side platforms17 and their impact on SME business. It explores the incentives, opportunities and challenges for SMEs to move operations onto these often large and international digital platforms in order to understand implications for policy makers. In particular, how SMEs leverage such platforms to perform specific business functions, such as: marketing, communication, service delivery, financing, payment, remote working, teleconferencing, or innovation, etc. To this end, the analysis takes into account the most recent academic literature, internationally comparable data and policy experiences. It gives a particular focus to the effects of the COVID-19 pandemic on SME uptake of digital platforms, and how governments are responding by leveraging the potential of platforms.

Online platforms allow SMEs to reduce transaction costs and information asymmetries, and enable important direct and indirect network effects, increasing customer bases and global reach, overcoming size-based skills gap, whilst also opening up innovation opportunities. Evidence shows higher productivity levels in sectors with a high share of SMEs (e.g. hotels, restaurant, taxis, retail) and a presence of more developed online platforms, as well as an association between higher labour productivity growth and more SMEs engaging in online activities on platforms, the effect being stronger the smaller the firm.

However, there are considerable challenges and risks for SMEs in using online platforms. First of all the lack of skills, understanding, or adequate business models to fully exploit the benefits of online operations. But also important risks related to data protection, potential competition distortion, digital security, and lock-in effects that might negatively and disproportionately impact SMEs.

While there is a significant effort at international level to provide comprehensive and internationally comparable data on the digital economy, a full understanding of the use of online platforms by SMEs is still non-trivial. Comparable international data on e-commerce show an increasing participation of firms of all sizes, and a strong acceleration during the pandemic. Usually, SMEs are more likely to sell online through their own website/apps than on e-commerce marketplaces, but smaller firms with an important share of online sales make most of them via online platforms.

Data on social media platforms suggest a mainstreamed use among large firms (more than 80% of large firms in the OECD area already use social media), less intensive use among SMEs (on average more than 50% of SMEs). But still wide differences in use across countries and firm-sizes, with social media use in the top five countries above 70% for small companies and 80% for medium-sized companies, while in the bottom five respectively less than 45% of small companies and less than 60% of medium-sized companies. Skills matter in this case: while a basic use (e.g. creating a page, uploading some general information) do not require any particular ability, effective more advanced use of these channels, e.g. for advertising, marketing and managing customer relations, require training staff, e.g. on how to increase traffic, manage reviews and reactions, build network, impressions). In fact, the provision of ICT training to non ICT staff seems to be associated with a more intensive use of social media, the effect being stronger the smaller the firm.

Governments are offering a range of support policies to encourage SME uptake of online platforms, although the diffusion of online platforms varies widely across countries and regions for both structural and policy reasons. A growing number of OECD government programmes aim to encourage the digitalisation of SME operations through online platforms and sometimes in co-operation with them. The COVID-19 crisis reinforced policy efforts in that direction, with increased attention to strengthening e-commerce, advertising, communication and remote working capabilities. Six country cases of Australia, Denmark, France, Korea, New Zealand and the United Kingdom are explored in more detail to better understand the design and governance of policies aiming to encourage SME operations on online platforms.

Further exploration of the topic would need a strengthened evidence base, for example by expanding the collection of data on micro-firms (below 10 employees, currently missing in international statistics on ICT business use), expanding the coverage of ICT data to other types of platforms, beyond e-commerce and social media, getting a better understanding on the return on investments for micro and SMEs to move part of their business functions on digital platforms, and which ones. Likewise, better understanding the impact of digital platforms on market structures (OECD, 2019[2]), business and competition conditions, and the internal processes of SMEs is critical to future policy making in the area.

Multi-stakeholder efforts including the private sector, large firms, digital platforms and SMEs themselves, like the Digital for SMEs Global Initiative (D4SME) that is promoted by the OECD and Business at OECD, might help OECD governments. For instance, by gathering relevant SMEs use cases for information and awareness purposes (as the two integrated in Box 3.2 and Box 3.3), as well as by building research co-operation with academia and large online platforms, in order to leverage original data, better understand the evolution of the sector and the place of SMEs and micro-firms within, and ultimately better inform policy makers.

References

[58] Ainin, S. et al. (2015), “Factors influencing the use of social media by SMEs and its performance outcomes”, Industrial Management and Data Systems, Vol. 115/3, pp. 570-588, http://dx.doi.org/10.1108/IMDS-07-2014-0205.

[44] Amazon (2020), Learn how to sell online, Amazon Seller University, https://services.amazon.in/resources/seller-university.html (accessed on 8 September 2020).

[69] Australian Government (2020), Get your products or services online, business.gov.au, https://www.business.gov.au/Guide/Digital/Get-your-products-or-services-online (accessed on 16 July 2020).

[71] Australian Government Productivity Commission and New Zealand Productivity Commission (2019), Growing the digital economy in Australia and New Zealand: Maximising opportunities for SMEs, https://www.productivity.govt.nz/assets/Research/b32acca009/Growing-the-digital-economy-in-Australia-and-New-Zealand_Final-Report.pdf.

[4] Bailin Rivares, A. et al. (2019), “Like it or not? The impact of online platforms on the productivity of incumbent service providers”, OECD Economics Department Working Papers, No. 1548, OECD Publishing, Paris, https://dx.doi.org/10.1787/080a17ce-en.

[37] Belleflamme, P. and M. Peitz (2018), “Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations”, Working Papers, Aix-Marseille School of Economics 6, http://dx.doi.org/10.2139/ssrn.3128141.

[32] Brynjolfsson, E., X. Hui and M. Liu (2019), “Does machine translation affect international trade? Evidence from a large digital platform”, Management Science, Vol. 65/12, pp. 5449-5460, http://dx.doi.org/10.1287/mnsc.2019.3388.

[9] Brynjolfsson, E. et al. (2008), “Scale Without Mass: Business Process Replication and Industry Dynamics”, Harvard Business School Technology & Operations Mgt. Unit Research Paper No. 07-016, http://dx.doi.org/10.2139/ssrn.980568.

[79] Calvino, F. et al. (2018), “A taxonomy of digital intensive sectors”, OECD Science, Technology and Industry Working Papers, No. 2018/14, OECD Publishing, Paris, https://dx.doi.org/10.1787/f404736a-en.

[59] Chatterjee, S. and A. Kumar Kar (2020), “Why do small and medium enterprises use social media marketing and what is the impact: Empirical insights from India”, International Journal of Information Management, Vol. 53, p. 102103, http://dx.doi.org/10.1016/j.ijinfomgt.2020.102103.

[11] Choudary, S. (2015), Platform Scale: How an emerging business model helps startups build large empires with minimum investment, Platform Thinking Labs, https://www.amazon.fr/Platform-Scale-emerging-business-investment/dp/9810967586/ref=pd_lpo_14_t_1/261-7144033-7648824?_encoding=UTF8&pd_rd_i=9810967586&pd_rd_r=74e77d48-6a57-400d-b039-8d63ea9bf576&pd_rd_w=ERrks&pd_rd_wg=mkZ8B&pf_rd_p=a9e8383d-b25d-45ec-acc2-a094dd781c31&pf_rd_r=WAKK5K58ZZ5VK3TNPEPX&psc=1&refRID=WAKK5K58ZZ5VK3TNPEPX (accessed on 31 August 2020).

[5] Costa, H. et al. (2020), Are online platforms killing the offline star? Platform diffusion and the productivity of traditional firms, OECD Working Party No. 1 on Macroeconomic and Structural Policy Analysis.

[36] Cusumano, M. (2020), The bigger some platforms get, the more money they lose, MIT Sloan Experts/Platform Strategy, https://mitsloan.mit.edu/experts/bigger-some-platforms-get-more-money-they-lose (accessed on 1 September 2020).

[72] Danish Government (2018), SMV: Digital, https://smvdigital.dk/e-handel/om-e-handelscenter (accessed on 9 September 2020).

[29] De Reuver, M., C. Sørensen and R. Basole (2017), “The digital platform: a research agenda”, http://dx.doi.org/10.1057/s41265.

[15] eMarketer (2020), Global Digital Ad Spending 2019 - Insider Intelligence Trends, Forecasts & Statistics, https://www.emarketer.com/content/global-digital-ad-spending-2019 (accessed on 28 November 2020).

[87] European Commission (2020), “Integration of Digital Technology by Enterprises”, Shaping Europe’s digital future, https://ec.europa.eu/digital-single-market/en/integration-digital-technology-enterprises (accessed on 30 November 2020).

[45] European Commission (2020), Supporting digital skills development in European SMEs | EASME, https://ec.europa.eu/easme/en/news/supporting-digital-skills-development-european-smes (accessed on 8 September 2020).

[26] European Commission (2020), Who can telework today? The teleworkability of occupations in the EU, EU Commission, Science for Policy Briefs, https://ec.europa.eu/jrc/sites/jrcsh/files/policy_brief_-_who_can_telework_today_-_the_teleworkability_of_occupations_in_the_eu_final.pdf (accessed on 28 November 2020).

[17] European Commission (2019), “How do online platforms shape our lives and businesses? - Brochure”, Shaping Europe’s digital future, https://ec.europa.eu/digital-single-market/en/news/how-do-online-platforms-shape-our-lives-and-businesses-brochure (accessed on 30 November 2020).

[55] Eurostat (2020), Community survey on ICT usage and e-commerce in enterprises.

[60] Eurostat (2020), Social media - statistics on the use by enterprises - Statistics Explained, https://ec.europa.eu/eurostat/statistics-explained/index.php/Social_media_-_statistics_on_the_use_by_enterprises#Types_of_social_media_used_over_time_.282013-2019.29 (accessed on 16 September 2020).

[27] Evans, D., A. Hagiu and R. Schmalensee (2008), Invisible Engines: How software platforms drive innovation and transform industries, The MIT Press, Cambridge, https://library.oapen.org/handle/20.500.12657/26084 (accessed on 28 August 2020).

[14] Evans, P. and A. Gawer (2016), The Rise of the Platform Enterprise. A Global Survey, The Centre for Global Enterprise.

[23] Forbes (2019), The Soon To Be $200B Online Food Delivery Is Rapidly Changing The Global Food Industry, https://www.forbes.com/sites/sarwantsingh/2019/09/09/the-soon-to-be-200b-online-food-delivery-is-rapidly-changing-the-global-food-industry/?sh=7a6f2eeeb1bc (accessed on 28 November 2020).

[83] Gawer, A. and M. Cusumano (2013), “Industry Platforms and Ecosystem Innovation”, Journal of Product Innovation Management, Vol. 31/3, http://dx.doi.org/10.1111/jpim.12105.

[85] Ghazawneh, A. and O. Henfridsson (2015), “A Paradigmatic Analysis of Digital Application Marketplaces”, Journal of Information Technology, Vol. 30/3, pp. 198-208, http://dx.doi.org/10.1057/jit.2015.16.

[31] GItHub (2020), The State of the Octoverse, https://octoverse.github.com/ (accessed on 7 September 2020).

[3] Goldfarb, A. and C. Tucker (2019), “Digital Economics †”, Journal of Economic Literature 1, pp. 3-43, http://dx.doi.org/10.1257/jel.20171452.

[20] Holland, C. and M. Gutiérrez-Leefmans (2018), “A Taxonomy of SME E-Commerce Platforms Derived from a Market-Level Analysis”, International Journal of Electronic Commerce, Vol. 22/2, pp. 161-201, http://dx.doi.org/10.1080/10864415.2017.1364114.

[18] IAB.uk (2020), Digital advertising crucial to SMEs’ recovery, https://www.iabuk.com/news-article/digital-advertising-crucial-smes-recovery (accessed on 7 September 2020).

[22] ITC (2016), Bringing SMEs onto the e-commerce highway, ITC, Geneva, https://www.intracen.org/uploadedFiles/intracenorg/Content/Publications/Bringing%20SMEs%20onto%20the%20e-Commerce%20Highway_final_250516_Low-res.pdf (accessed on 26 August 2020).

[34] Katz, M. and C. Shapiro (1985), “Network externalities, competition, and compatibility”, American Economic Review, Vol. 75/3, pp. 424-440, http://dx.doi.org/10.2307/1814809.

[33] Kenney, M. (2016), The Rise of the Platform Economy, Issues in Science and Technology 32, No. 3, https://issues.org/the-rise-of-the-platform-economy/ (accessed on 16 July 2020).

[47] Khan, L. (2017), Amazon’s Antitrust Paradox, pp. 710-805, https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=5785&context=ylj (accessed on 26 November 2020).

[74] Korean Government (2020), Ministry of SMEs and Startups: Exports, https://www.mss.go.kr/site/eng/03/20301120000002019110758.jsp.

[39] López González, J. (2017), “Mapping the participation of ASEAN small- and medium- sized enterprises in global value chains”, OECD Trade Policy Papers, No. 203, OECD Publishing, Paris, https://dx.doi.org/10.1787/2dc1751e-en.

[61] McCann, M. and A. Barlow (2015), “Use and measurement of social media for SMEs”, Journal of Small Business and Enterprise Development, Vol. 22/2, pp. 273-287, http://dx.doi.org/10.1108/JSBED-08-2012-0096.

[12] Mediakix (2020), TikTok User Growth Infographic, https://mediakix.com/blog/tik-tok-user-growth-infographic/ (accessed on 4 December 2020).

[73] Ministère de l’économie des finances et de la relance (2020), E-commerce : Des offres préférentielles pour permettre aux commerçants de poursuivre une activité, economie.gouv.fr, https://www.economie.gouv.fr/coronavirus-e-commerce-offres-preferentielles-commercants (accessed on 16 July 2020).

[40] Morais, F. and J. Ferreira (2020), “SME internationalisation process: Key issues and contributions, existing gaps and the future research agenda”, European Management Journal, Vol. 38/1, pp. 62-77, http://dx.doi.org/10.1016/j.emj.2019.08.001.

[43] Morgan Stanley (2020), COVID-19 serves up big changes for U.S. restaurants, https://www.morganstanley.com/ideas/coronavirus-restaurant-trends.

[30] Nambisan, S., M. Wright and M. Feldman (2019), “The digital transformation of innovation and entrepreneurship: Progress, challenges and key themes”, Research Policy, Vol. 48/8, p. 103773, http://dx.doi.org/10.1016/j.respol.2019.03.018.

[77] New Zealand Government (2020), business.govt.nz, https://www.business.govt.nz/.

[76] New Zealand Government (2019), Ministry of Business, Innovation & Employment: Small Business Council, https://www.mbie.govt.nz/business-and-employment/business/support-for-business/small-business/.

[70] NSW Government (2019), Digital Collaboration Tools, http://dx.doi.org/08/09/2020.

[46] OECD (2020), Abuse of Dominance in Digital Markets, http://www.oecd.org/daf/competition/abuse-of-dominance-in-digital-markets-2020.pdf.

[64] OECD (2020), “Coronavirus (COVID-19): SME policy responses”, OECD Policy Responses to Coronavirus (COVID-19), http://www.oecd.org/coronavirus/policy-responses/coronavirus-covid-19-sme-policy-responses-04440101/.

[56] OECD (2020), “E-commerce in the time of COVID-19”, OECD Policy Responses to Coronavirus (COVID-19), http://www.oecd.org/coronavirus/policy-responses/e-commerce-in-the-time-of-covid-19-3a2b78e8/ (accessed on 30 November 2020).

[25] OECD (2020), Financing SMEs and Entrepreneurs 2020: An OECD Scoreboard, OECD Publishing, Paris, https://dx.doi.org/10.1787/061fe03d-en.

[52] OECD (2020), Guidelines for Supply-Use tables for the Digital Economy, http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=SDD/CSSP/WPNA(2019)1/REV1&docLanguage=En.

[66] OECD (2020), “Italian regional SME policy responses”, OECD Policy responses to Coronavirus (COVID-19), http://www.oecd.org/coronavirus/policy-responses/italian-regional-sme-policy-responses-aa0eebbc/.

[54] OECD (2020), OECD ICT Access and Usage by Businesses Database, https://stats.oecd.org/Index.aspx?DataSetCode=ICT_BUS (accessed on 25 November 2020).

[65] OECD (2020), Policy Options to Support Digitalisation of Business Models during COVID-19: Annex, Report for the G20 Digital Economy Task Force, Saudi Arabia 2020, https://www.oecd.org/sti/policy-options-to-support-digitalization-of-business-models-during-covid-19-annex.pdf.

[42] OECD (2020), The impact of digitalisation on trade, https://www.oecd.org/trade/topics/digital-trade/ (accessed on 29 November 2020).

[68] OECD (2020), “The OECD Digital Government Policy Framework: Six dimensions of a Digital Government”, OECD Public Governance Policy Papers, No. 02, OECD Publishing, Paris, https://dx.doi.org/10.1787/f64fed2a-en.

[13] OECD (2020), The rle of online platforms in weathering the COVID-19 shock.

[6] OECD (2019), An Introduction to Online Platforms and Their Role in the Digital Transformation, OECD Publishing, Paris, https://dx.doi.org/10.1787/53e5f593-en.

[63] OECD (2019), Financing SMEs and Entrepreneurs 2019: An OECD Scoreboard, OECD Publishing, Paris, https://dx.doi.org/10.1787/fin_sme_ent-2019-en.

[51] OECD (2019), Measuring the Digital Transformation: A Roadmap for the Future, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264311992-en.

[2] OECD (2019), OECD SME and Entrepreneurship Outlook 2019, OECD Publishing, Paris, https://dx.doi.org/10.1787/34907e9c-en.

[16] OECD (2019), “Online advertising: Trends, benefits and risks for consumers”, OECD Digital Economy Papers, No. 272, OECD Publishing, Paris, https://dx.doi.org/10.1787/1f42c85d-en.

[19] OECD (2019), Unpacking E-commerce: Business Models, Trends and Policies, OECD Publishing, Paris, https://dx.doi.org/10.1787/23561431-en.

[41] OECD (2018), Fostering Greater SME participation in a globally integrated economy, SME Ministerial Conference, Mexico City.

[80] OECD (2018), Rethinking Antitrust Tools for Multi-Sided Platforms, https://www.oecd.org/daf/competition/rethinking-antitrust-tools-for-multi-sided-platforms.htm (accessed on 16 July 2020).

[88] OECD (2017), Algorithms and Collusion: Competition Policy in the Digital Age, OECD, Paris, http://www.oecd.org/competition/algorithms-collusion-competition-policy-in-the-digital-age.htm.

[62] OECD (2017), OECD Digital Economy Outlook 2017, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264276284-en.

[48] OECD (2016), OECD Recommendation of the Council on Consumer Protection in E-Commerce, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264255258-en.

[81] OECD (2015), Data-Driven Innovation: Big Data for Growth and Well-Being, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264229358-en.

[57] OECD (2015), The OECD Model Survey on ICT Usage by Businesses 2 nd Revision.

[82] OECD (2013), OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data, https://www.oecd.org/internet/ieconomy/oecdguidelinesontheprotectionofprivacyandtransborderflowsofpersonaldata.htm (accessed on 27 August 2020).

[24] OECD (Upcoming), Trade finance for SMEs in the Digital Era.

[53] OECD, WTO and IMF (2020), Handbook on Measuring Digital Trade, https://www.oecd.org/sdd/its/handbook-on-measuring-digital-trade.htm.

[84] OECD/European Union (2019), The Missing Entrepreneurs 2019: Policies for Inclusive Entrepreneurship, OECD Publishing, Paris, https://dx.doi.org/10.1787/3ed84801-en.

[21] OECD/WTO (2017), Aid for Trade at a Glance 2017: Promoting Trade, Inclusiveness and Connectivity for Sustainable Development, World Trade Organization, Geneva/OECD Publishing, Paris, https://dx.doi.org/10.1787/aid_glance-2017-en.

[38] Olson, P. (2015), “Exclusive: The Rags-To-Riches Tale Of How Jan Koum Built WhatsApp Into Facebook’s New $19 Billion Baby”, Forbes, https://www.forbes.com/sites/parmyolson/2014/02/19/exclusive-inside-story-how-jan-koum-built-whatsapp-into-facebooks-new-19-billion-baby/#70442bc82fa1 (accessed on 1 September 2020).

[67] O’Reilly, T. (2011), “Government as a Platform”, Innovations: Technology, Governance, Globalization, Vol. 6/1, pp. 13-40, http://dx.doi.org/10.1162/inov_a_00056.

[86] Oxford Review (2020), Open innovation: Definition and explanation, https://www.oxford-review.com/oxford-review-encyclopaedia-terms/encyclopaedia-open-innovation-definition-explanation/.

[49] Park, K., R. Seamans and F. Zhu (2017), “Multi-Homing and Platform Strategies: Historical Evidence from the US Newspaper Industry”, Harvard Business Review, No. 18-032, Harvard Business Review.

[8] Rochet, J. and J. Tirole (2006), “Two-Sided Markets: A Progress Report”, RAND Journal of Economics, Vol. 37/3, pp. 645-667.

[7] Rochet, J. and J. Tirole (2003), “Platform Competition in Two-Sided Markets”, Journal of the European Economic Association, Vol. 1/4, pp. 990-1029, http://dx.doi.org/10.1162/154247603322493212.

[10] SEC (2014), Facebook to Acquire WhatsApp, https://www.sec.gov/Archives/edgar/data/1326801/000132680114000010/exhibit991_pressrelease219.htm (accessed on 31 August 2020).

[35] Shapiro, C. and H. Varian (1998), Information Rules: A Strategic Guide to the Network Economy, Harvard Business Review Press, https://www.amazon.fr/Information-Rules-Strategic-Network-Economy/dp/087584863X (accessed on 1 September 2020).

[75] The Korea Herald (2019), South Korea to foster 15,000 e-commerce exporters by 2022, http://www.koreaherald.com/view.php?ud=20190508000685 (accessed on 16 July 2020).

[1] U.S. Census Bureau (2020), Census BUreau provides data on fast-growing retail e-commerce sales, https://www.census.gov/library/stories/2020/11/share-of-online-retail-sales-soaring.html#:~:text=On%20a%20seasonally%20adjusted%20basis,to%20the%20U.S.%20Census%20Bureau.

[78] UK Government (2018), E-commerce for UK small businesses selling online to the USA - GOV.UK, https://www.gov.uk/government/publications/e-commerce-for-uk-small-businesses-selling-online-to-the-usa/e-commerce-for-uk-small-businesses-selling-online-to-the-usa (accessed on 16 July 2020).

[28] Yoo, Y., O. Henfridsson and K. Lyytinen (2010), “The new organizing logic of digital innovation: An agenda for information systems research”, Information Systems Research, Vol. 21/4, pp. 724-735, http://dx.doi.org/10.1287/isre.1100.0322.

[50] Zhu, F. and M. Iansiti (2019), “Why Some Platforms Thrive and Others Don’t”, Harvard Business Review, https://hbr.org/2019/01/why-some-platforms-thrive-and-others-dont (accessed on 8 September 2020).

Notes

← 1. Some researchers defines platforms as business models that are rooted in the core interaction between end-users, “followed by the design of an open infrastructure that will enable and govern this interaction” (Choudary, 2015[11]).

← 2. These classifications include previous OECD work (OECD, 2015[81]; OECD, 2013[82]), as well as the typologies proposed in (Gawer and Cusumano, 2013[83]).

← 3. For example: false or misleading advertising, “masked” advertising (not identifiable by consumers as such), leveraging of consumer biases and vulnerabilities, “malvertising” (using online ads to infect devices with malwares), misuse of personal data threatening consumer privacy and security.

← 4. These platforms have also another role as “employers” in “the Gig economy”. As multi-sided platforms, they actually connect three types of end-users: restaurants, customers and couriers. In-depth discussion on the conditions of “gig-economy” workers and their conditions as self-employed, while out of the scope of this report, can be found in (OECD/European Union, 2019[84]).

← 5. 63% of the global volumes are concentrated in the People’s Republic of China, followed by the United States with 21% and by the United Kingdom with 8%.

← 6. Know Your Customer is a regulatory requirement that financial institution have to comply with, meaning the mandatory process of identifying and verifying the identity of the client when opening an account and periodically over time.

← 7. Digital payment platforms are extremely popular in the People’s Republic of China, with services as AliPay and WeChat (platform integrating Social Media services) used by hundreds of millions of people. While in this chapter we focus on services present in OECD countries, a more detailed discussion of the innovative practices in China are discussed in (OECD, 2019[6]).

← 8. The definition advanced by (Ghazawneh and Henfridsson, 2015[85]) of “software-based external platforms consisting of the extensible codebase of a software-based system that provides core functionality shared by the modules that interoperate with it and the interfaces through which they interoperate”. These modules are add-on software, usually in the form of the applications or “Apps” ultimately delivering services to the end-users.

← 9. Open innovation indicates “a situation where an organisation doesn’t just rely on their own internal knowledge, sources and resources (such as their own staff or R&D for example) for innovation (of products, services, business models, processes, etc.) but also uses multiple external sources (such as customer feedback, published patents, competitors, external agencies, the public, etc.) to drive innovation” (Oxford Review, 2020[86]).

← 10. It is interesting to note that in “single end-user” services (as cloud-computing, business intelligence software) there are inherently no indirect network effects, but this type of positive direct network effects can be relevant.

← 11. “Digital intensive” refers to characteristics of the sectors as development and adoption of the most advanced “digital” technologies, the human capital needed to embed them in production and the extent to which digital tools are used to deal with clients and suppliers. The full taxonomy is proposed in (Calvino et al., 2018[79]).

← 12. However, a recent trend is lowering these costs consistently. There are increasingly successful online service providers (e.g. Shopify, Wix) offering tools to build a proprietary e-commerce website without the need for any specific technical skill.

← 13. An overview of the main issues can be found in (OECD, 2019[6]), while a detailed analysis of Competition issues can be found for example in the work of OECD’s Competition Division (OECD, 2017[88]) and (OECD, 2018[80]).

← 14. Algorithmic price setting is the practice of setting up algorithms that evaluate a number of factors (e.g. probabilistic analysis of potential buyers behaviour, price of competing products, personal information on the buyer) to set up a price that has the highest probability of making the trade happen while maximising the value for the seller. However, there is the risk of anti-competitive practice, as firms can set up algorithm to collude without the need of any human interaction (OECD, 2017[88]).

← 15. For instance in e-commerce, where multiple surveys allow to have some historical data, there are various methodological problems (e.g. different practices for data collection and estimations, treatment of outliers, accounting systems of businesses not differentiating between online and offline sales). On the other typologies of online platforms relevant to SMEs, data are relatively scarce and scattered. Most information on advertising, service delivery (disruptors and aggregators), communication, and innovation platforms are provided by the private online platforms themselves.

← 16. Similarly, in the European Union 17.5% of SMEs sold online in 2019 (increasing by 1.4% from 2016), while 39% of large firms did so (European Commission, 2020[87]).

← 17. See sub-section on “Online platforms: Features, benefits and challenges for SMEs”: “an online platform is a digital service that facilitates interactions between two or more distinct but interdependent sets of users (whether firms or individuals) who interact through the service via the internet”..

Metadata, Legal and Rights

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Extracts from publications may be subject to additional disclaimers, which are set out in the complete version of the publication, available at the link provided.

© OECD 2021

The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions.