Digital transformation is reshaping how SMEs compete, but requires more than access to technology. This cluster examines whether the right conditions are in place for SMEs to navigate this transition successfully. It looks at how policies are designed and implemented to support SME digitalisation and productivity, how they build the digital safety environment that underpins trust and resilience, and how they support SMEs in moving beyond basic digital tools toward more advanced and sustainable technologies; assessing in each case whether policy ambition is matched by effective delivery and measurable outcomes at firm level.
SME Policy Index for Western Balkans and Türkiye 2026
Regional Profile
Abstract
Across the Western Balkans and Türkiye (WBT) digital transformation is one of the most important and unexploited opportunities for small and medium-sized enterprise (SME) productivity growth and economic convergence with the European Union. SMEs are the foundation of all WBT economies, accounting for most employment and value creation (OECD, 2022[1]). Digital adoption among these firms is largely confined to basic tool uptake (e.g. company websites, social media and electronic invoicing) (OECD, forthcoming[2]), falling short of the deeper organisational and technological shifts that generate sustained productivity gains, enable integration into European value chains and strengthen competitiveness in increasingly digitalised markets.
Realising this potential is not a question of technology availability: SMEs require a surrounding ecosystem that supports them throughout the transition, from initial adoption to genuine transformation. This encompasses digital and managerial skills, access to finance and advisory support, interoperable infrastructure, and coherent governance (OECD, 2019[3]; 2021[4]; 2024[5]). Public policy plays a decisive role in shaping this ecosystem. When policy frameworks are well-designed and coherent, digitalisation delivers measurable economic returns at the firm level; when they are not, adoption remains shallow and productivity gains fail to materialise (OECD, 2019[6]; Gal et al., 2019[7]).
Against this backdrop, this section assesses the extent to which the foundational conditions for SME digital transformation are in place across the WBT region. It examines the coherence of policy and financial support frameworks, the level of digital maturity among SMEs, and the availability of the skills and capacities required for deeper digital adoption.
3.1.1. Strengthening policy and financial support for SME digital transformation
The first key component of a robust digital ecosystem is the policy and financial environment that supports SMEs to overcome the barriers associated with digital adoption. SMEs face higher relative adoption costs, limited in-house expertise and greater uncertainty in sequencing digital investments (OECD, 2021[4]). Strategic clarity, institutional co-ordination and well-designed policy instruments are, therefore, critical to help SMEs move beyond basic tool uptake toward broader, productivity-enhancing transformation (OECD, 2019[3]). In this context, it is worth distinguishing between digitalisation and digital transformation. Digitalisation refers to the adoption of digital tools and technologies to improve existing processes. Digital transformation implies a more fundamental reorganisation of business models, operations and value creation (OECD, 2019[8]). While most policy frameworks in the WBT region reference digitalisation, few systematically support digital transformation.
While strategic frameworks across the WBT region often recognise SME digital transformation, translating these commitments into well-defined, targeted and adequately resourced SME-specific measures is uneven
All WBT economies reference digitalisation in at least one core strategic document, typically through SME strategies, industrial policies, innovation frameworks or digital agendas (Table 3.1), often linking it to competitiveness and productivity growth. Although almost all economies have SME-specific digitalisation measures, the measures vary considerably in their specificity and operational depth. A lot of them consist of broad programme references without clearly defined targets, dedicated budgets or performance indicators linked to firm-level outcomes. This gap limits their effectiveness regardless of whether they are embedded in horizontal or vertical policy frameworks. Moreover, where targets and indicators do exist, they tend to be narrowly defined, focusing on activity-level outputs such as the number of firms supported or training sessions delivered rather than on more ambitious, outcome-oriented measures that would capture genuine improvements in SME digital maturity, productivity or competitiveness.
Two recurring policy tendencies can be observed, often overlapping in practice. In Bosnia and Herzegovina, Kosovo*, Montenegro, and North Macedonia, digitalisation is primarily framed as a horizontal strategic objective embedded in broader strategic frameworks. While this approach signals high-level policy commitment, in some economies it tends to diffuse responsibilities across institutions and instruments, weakening co‑ordination and limiting the translation of strategic priorities into concrete, SME-focused support. Albania, Serbia and Türkiye, on the other hand, have more strongly anchored SME digitalisation in their innovation, ICT and industrial development agendas. In these economies, digitalisation support is more closely linked to broader competitiveness objectives, with dedicated measures targeting start-ups, technology-intensive firms and high-value digital sectors as key drivers of productivity and structural transformation. This creates stronger connections between SME support systems, research institutions, technology providers and digital infrastructure, enabling firms to access a broader range of expertise and financing opportunities. However, it may also concentrate resources on more technologically advanced firms, and may not reach the broader SME population. In Türkiye, for example, support instruments are predominantly geared towards technology-intensive enterprises and scale-ups, leaving smaller and less digitally mature firms less systematically targeted. This highlights the need for complementary policies that reach the entire SME population. Supporting the most innovative and growth-oriented firms and broadening digital adoption among less advanced enterprises are not competing policy objectives; the most effective frameworks pursue both simultaneously (OECD, 2021[4]).
Despite these differences, both approaches share a common structural limitation: support is rarely tailored to the varying needs and starting points of different SMEs. As a result, policy measures tend to apply the same instruments across a very diverse business population, limiting their relevance for firms at very different stages of digital adoption.
Notes:
1. Indicates whether strategies target SME digitalisation and/or digital transformation. This includes stand-alone SME digitalisation strategies and SME-related digitalisation objectives embedded within broader strategies.
2. Indicates whether governments have policy instruments that support SME adoption of digital technologies. These may include grants, vouchers, advisory programmes, digital innovation hubs, technology adoption schemes or financial instruments specifically designed to support SME digitalisation.
3. Indicates whether a formally mandated body, co-ordination platform or institutional mechanism exists to co-ordinate digital transformation policies across relevant government institutions.
4. Assesses whether governments operate formal mechanisms to monitor the implementation and results of SME digitalisation policies or programmes, such as indicators, reporting systems or programme evaluations. Monitoring may occur at the programme or strategy level.
5. Assesses whether governments collect or use analytical evidence on SME digital adoption and barriers, such as digital maturity assessments, enterprise surveys or analytical studies. In some WBT economies this is done outside of government assessments as part of the European Digital Innovation Hub project.
6. Bosnia and Herzegovina is assessed mostly at the entity level due to its decentralised governance structure. In several policy areas, digitalisation policies affecting SMEs are developed and implemented at the entity level rather than at the state level.
7. The WB6 Digital Agenda is a regional initiative whose geographical scope does not formally include Türkiye. However, several Türkiye's strategic frameworks are highly convergent with the objectives of the EU's Digital Decade Policy Programme 2030.
Source: Information provided by the governments of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, and Türkiye during the 2026 assessment cycle.
In parallel, the extent to which strategic commitments are translated into concrete institutional ownership and operational ambition varies significantly across the WBT region. Some economies have a designated lead institution with a clear mandate to drive implementation; in others, responsibility remains diffuse, with no single body accountable for SME digital transformation outcomes. This institutional dimension is a key determinant of whether policy commitments reach SMEs. In economies where institutional arrangements for SME digitalisation are less clearly defined at the overall governance level, as observed in Bosnia and Herzegovina1 and Montenegro, co-ordination across responsible bodies can be more complex, with the risk of scattered instruments, gaps between support measures and weak targeting of SMEs, reinforcing the implementation challenges already associated with horizontally framed approaches.
Other economies have introduced clearer co-ordination mechanisms. North Macedonia’s Ministry of Digital Transformation and Türkiye's newly established Cyber Security Presidency both play an active co‑ordinating role across relevant policy domains, providing a stronger institutional basis for coherent policies. However, designating a lead institution does not automatically guarantee effective support for SMEs. If the co-ordinating body’s core mandate is primarily focused on digital infrastructure or public sector digitalisation rather than on SME development, there is a risk of implementation mismatch: the institution may be well-placed to drive public sector digital transformation but less equipped to design and deliver business-facing support tailored to firm-level SME needs. This is the case in Serbia, where the Office for Information Technologies and eGovernment has been designated as the lead institution for key digital measures, but its mandate is primarily public sector oriented, limiting direct engagement with SMEs. Effective co-ordination, therefore, requires not only assigning a lead institution, but ensuring that it has the mandate, capacity and operational focus to support SMEs directly.
Financing support measures for SME digital transformation remains fragmented and unevenly distributed across the digital transformation trajectory
The support landscape for SME digitalisation across the WBT region is a scattering of instruments, institutions and funding sources, limiting its overall effectiveness at the firm level despite the growing availability of repayable and non-repayable schemes. While almost all economies have some form of support, its scope, ambition and accessibility vary considerably (Table 3.2). Across the region, eligibility conditions, co-financing requirements and administrative complexity can favour SMEs with stronger organisational and financial capabilities, potentially limiting access for less digitally advanced SMEs. However, systematic evidence on the extent to which these conditions effectively exclude SMEs remains is limited.
These structural features are reflected in differing policy orientations across the region. All WBT economies provide grants for the acquisition of digital tools and software, establishing a common baseline of support across the region. Support for SME participation in digital transformation programmes is widely available, except in Albania and North Macedonia. In some economies, including Albania, Bosnia and Herzegovina, and Montenegro, support is predominantly oriented towards entry-level digital adoption, such as website development, digital marketing and basic connectivity upgrades. In others, notably North Macedonia, Serbia and Türkiye, the most substantial instruments are embedded within innovation or industrial policy frameworks targeting start-ups, R&D-intensive firms, or manufacturing modernisation. While this reflects a more advanced policy orientation, it could also result in a narrower reach.
Note: 1. The table includes an overview of the financial support for SMEs at the state level (Bosnia and Herzegovina) and at the entity level (Federation of Bosnia and Herzegovina and Republika Srpska).
Source: Information provided by the governments of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, and Türkiye during the 2026 assessment cycle.
Beyond these differences, an additional constraint lies in how support is distributed along the SME digitalisation trajectory. Key instruments remain limited for firms at the earliest stages of digital adoption as well as for those seeking to adopt more advanced digital tools. Demand-driven instruments designed to support early-stage adoption, such as digitalisation vouchers, advisory subsidies or small grants with low administrative requirements, are not widespread across the region, although some economies, notably Kosovo, Montenegro and Serbia, have introduced such tools (Eurofound and Cedefop, 2025[9]). At the other end of the spectrum, more sophisticated instruments required to support deeper digital transformation are also less developed. Only two WBT economies – Serbia and Türkiye – have implemented tools such as low-interest loans for IT infrastructure, “test before invest” programmes, or integrated packages combining finance with advisory services and skills development. Such integrated approaches are particularly important for less digitally mature SMEs, which often lack not only financial resources but also the organisational readiness required to use digital tools effectively (OECD, 2019[8]).
As a result, public financial support does not cover the full digital transformation process evenly. While certain instruments target basic adoption and others focus on more advanced use cases, few address the intermediate stages of scaling, integration and organisational change. This can leave SMEs insufficiently supported at the point where they seek to move beyond initial adoption, and where investment needs and risks are the highest.
These gaps persist in part because a significant share of support is delivered through externally financed programmes, particularly initiatives carried out by the European Union or the European Bank for Reconstruction and Development, combining credit lines with technical assistance and investment incentives. While these programmes play an important role, reliance on project-based financing can introduce discontinuities in support availability and limit the development of domestically owned, scalable financing schemes, a risk well-documented in evaluations of externally financed SME support programmes (OECD, 2019[10]). Consequently, SME digitalisation support is channeled through multiple parallel mechanisms, including government grant schemes, donor-funded credit lines and specialised programmes, often implemented by different ministries, development agencies and financial intermediaries with limited co‑ordination across them. This fragmentation in funding and delivery reinforces broader governance challenges and can weaken the system’s ability to provide continuous and coherent support.
3.1.2. Assessing SMEs’ digital maturity
Beyond the policy environment, understanding the depth of SME digital engagement is equally critical. This requires moving beyond whether firms use digital tools to assessing how effectively these tools are integrated into core operations, workflows and strategic decision making. It is this depth of integration, rather than mere adoption, that determines whether digitalisation translates into productivity gains. OECD evidence suggests that SMEs tend to concentrate on affordable, low-risk applications that enhance online presence or streamline administrative tasks, rarely achieving the deeper integration that drives productivity growth, organisational change or business model innovation (OECD, 2023[11]). More advanced digitalisation tends to occur when SMEs are supported by coherent policy mixes combining skills development, tailored advisory services and accessible financing, underscoring that the depth of firm-level digital maturity is closely shaped by the quality and co-ordination of the broader support ecosystem (OECD, 2021[4]; 2023[11]).
SME basic digital adoption in the region appears to be widespread, but a digital maturity gap persists as SMEs rarely move beyond the use of basic digital tools
Evidence from the OECD survey on SMEs in the Western Balkans and Türkiye illustrates a digital maturity gap (see Annex A for more information). On average, around 93% of surveyed SMEs report using at least one digital tool (OECD, forthcoming[2]), indicating broad basic engagement with digital technologies. However, adoption remains heavily concentrated in foundational tools such as company websites, e‑invoicing and social media platforms (Figure 3.1). Uptake declines sharply for tools that support deeper business process integration: 24% use cloud computing, 22% of surveyed SMEs use enterprise resource planning (ERP), 15% adopt supplier-customer relationship management solutions and 14% rely on customer relationship management (CRM ) (OECD, forthcoming[2]). The use of digital sales channels such as e-commerce and e-booking also remains relatively limited among surveyed SMEs, suggesting that online presence does not systematically translate into fully digitalised commercial operations. The use of more advanced, data-driven technologies, including big data analytics or radio frequency identification, appears to be marginal across the WBT region. This concentration at foundational levels is broadly consistent with digital maturity patterns observed across surveyed OECD Member countries, where most SMEs remain at basic or intermediate stages of digital adoption, and only a minority reach advanced or transformative levels involving tools such as artificial intelligence (AI), the Internet of Things, data analytics or blockchain (Bianchini, 2025[12]).
Notes: The figure shows the regional average for the six Western Balkan economies and Türkiye. See Annex A for more information on the OECD survey methodology.
Source: OECD (forthcoming[2]).
SME digital adoption in the WBT region is primarily driven by operational efficiency and market expansion rather than strategic transformation objectives, thereby limiting its productivity impact
Survey evidence confirms that SMEs in the WBT region adopt digital tools primarily to support operational needs rather than strategic transformation: SMEs most frequently report adopting digital tools to broaden their customer base (53%), automate internal processes (52%), monitor business activities (46%) and support domestic sales (42%) (OECD, forthcoming[2]). Compared to the sample evidence from OECD countries, SMEs in the WBT region report higher rates of operationally driven adoption, motivated by immediate operational needs such as cost reduction, process efficiency and sales support, than by longer term strategic goals such as innovation or business model transformation (OECD, forthcoming[2]; Bianchini, 2025[12]). These findings suggest that digitalisation in the region is shaped at least in part by competitive and cost pressures rather than proactive transformation strategies. Among surveyed SMEs that use digital tools, regulatory compliance also emerges as a notable driver. Nearly 30% cite the need to comply with government regulations as a motivation for adopting digital tools. This further indicates that external pressures, rather than strategic intent, play a significant role in shaping digitalisation patterns across the region (OECD, forthcoming[2]). By contrast, more advanced or transformative uses, such as enhancing products and services (27%), optimising supply chains (26%), developing new revenue streams, (20%) and improving energy efficiency (17%), are reported considerably less frequently. These patterns point to a form of digitalisation focused on improving existing processes and maintaining market visibility rather than fundamentally reshaping business models. Firm size also plays a significant role: surveyed medium-sized enterprises in the WBT region are more likely to combine multiple digital solutions and deploy process-oriented tools, while micro firms rely predominantly on basic digital tools (OECD, forthcoming[2]). This highlights the importance of absorptive capacity, encompassing managerial resources, workforce skills and financial capacity, in determining the depth of digital engagement and suggests that policies aimed at expanding access to digital tools need to be complemented by stronger capability-building measures.
Notes: The figure excludes respondents who cited “Do not use digital tools” in the previous question; see Figure 3.1. See Annex A for more information on the OECD survey methodology.
Source: OECD (forthcoming[2]).
Financial and human capital constraints reinforce the digital maturity gap, pointing to the need for integrated capacity-building support
Survey findings point to two principal barriers to deeper digital adoption among SMEs in the WBT region. Cost-related constraints emerge as the most frequently cited barrier, encompassing not only upfront investments in equipment and software, but also ongoing expenses such as maintenance, technical services and staff training (Figure 3.3). Nearly 44% of surveyed SMEs in the region identify software maintenance and technical service costs as a key barrier, a share broadly in line with the 40% recorded in OECD Member country sample findings (OECD, forthcoming[2]; Bianchini, 2025[12]). This suggests that the financial burden of sustained digital investment is a challenge that extends beyond the WBT region. A second major constraint reported by SMEs in the WBT region relates to human capital. Surveyed SMEs report insufficient capacity to train employees (30%), difficulties in recruiting qualified staff (25%) and limited in-house digital capabilities (19%). Together, these financial and skill-related barriers can help explain the region’s digital maturity gap and point to the need for more integrated policy approaches that combine investment support, skills development and implementation capacity.
Notes: “None” refers to respondents who reported no challenges related to digital tool use (i.e. they did not cite any of the listed challenges), regardless of whether they use digital tools. See Annex A for more information on the OECD survey methodology.
Source: OECD (forthcoming[2]).
3.1.3. Enhancing digital skills and capacities
The depth of SME digital transformation depends not only on access to tools and finance, but on whether firms possess the internal capacities to adopt, integrate and derive value from digital technologies. As digital tools become more complex and embedded in business processes, SMEs require capacities that combine technical know-how with managerial competences and organisational adaptability (OECD, 2021[4]; 2023[13]). Because smaller firms invest less in structured training and face tighter resource constraints, they are particularly dependent on the broader skills ecosystem, making public policy a critical lever for ensuring that workforce development systems actively support SME digital upgrading.
While digital skills development features prominently in policy frameworks across WBT economies, dedicated measures supporting SME upskilling are scarce
Digital skills are embedded within education, employment and digital strategies across all WBT economies, but are rarely framed around SME workforce transformation specifically. Policy approaches across the region broadly follow two patterns. In the first group, which includes Albania, Bosnia and Herzegovina [Federation of Bosnia and Herzegovina], Kosovo, and North Macedonia, digital skills development is pursued primarily through education reforms and system-wide digital literacy initiatives, focusing on youth coding programmes and curriculum modernisation. While these investments build longer term human capital, they are not designed to address the immediate upskilling needs of the existing SME workforce. In a second group of economies, which includes Bosnia and Herzegovina [Republika Srpska], Montenegro, Serbia, and Türkiye, digital skills are integrated within digital, innovation or SME development strategies and linked to labour market alignment or technical vocational education and training reform. These frameworks are more directly connected to economic objectives and better positioned to address skills mismatches in the labour market. However, they still provide relatively few instruments explicitly targeting SME workforce upskilling at the firm level. Across both groups, the common gap is that strategic foundations exist, but operational instruments specifically designed to build digital capabilities within SME workforces remain limited.
SME in-house digital capacities remain constrained, reflecting both wider skills shortages and limited firm-level support
Building the internal capacities needed for deeper digital transformation appears to be a key challenge for SMEs across the WBT region. The share of individuals with basic or above-basic digital skills varies considerably across economies, with several falling well below the EU average of approximately 60% (Eurostat, 2025[14]). At the same time, ICT specialists remain in short supply, and employer-led digital training is limited (OECD, 2025[15]). This constrained skills base directly shapes what SMEs can develop internally. The effective integration of tools such as ERP, CRM, cloud computing or data analytics requires not only general digital literacy, but a combination of technical, analytical and managerial capabilities that smaller firms often struggle to attract and retain (OECD, 2021[4]). This challenge is compounded by the concentration of digital talent in larger firms offering more competitive working conditions (OECD, 2023[11]).
These structural constraints are further reinforced by weaknesses in policy systems. Across the region, support measures tend to be oriented toward one-off tool purchases rather than the ongoing capacity building that deeper digital transformation requires. Monitoring frameworks emphasise programme implementation over firm-level outcomes, systematic diagnosis of capacity gaps is limited and feedback mechanisms linking skills support to business performance remain underdeveloped. As a result, authorities lack a clear and comprehensive picture of where and how to intervene.
OECD survey findings provide additional insight into these dynamics. About 19% of surveyed SMEs in the WBT region identify insufficient digital skills as a barrier to digital transformation (OECD, forthcoming[2]). However, reported constraints vary significantly across economies, ranging from 10% in Kosovo to 29% in Serbia, and do not necessarily reflect underlying capacity levels. Higher reported constraints may reflect greater awareness among more digitally advanced firms, while lower shares may indicate limited digital ambition or exposure. As such, the relatively modest share of firms self-reporting skills as a constraint may, therefore, understate the real capacity gap, particularly among less digitally mature firms that may not yet fully recognise what more advanced adoption requires. Together these patterns suggest that a more systematic, evidence-based approach to diagnosing and addressing firm-level digital skills gaps is needed in the WBT region.
The way forward
Strengthen SME-centred digital transformation governance and implementation frameworks. Across the WBT region, moving beyond high-level strategic commitments will require clearer operational roadmaps for SME digital transformation. This includes defining lead institutions; strengthening inter-ministerial co-ordination across digital, innovation and SME policies; and introducing measurable targets and monitoring mechanisms to ensure that strategic objectives translate into concrete firm-level outcomes. Systematically segmenting SMEs by digital maturity within policy frameworks would further strengthen implementation by enabling governments to calibrate support to where firms are actually in their digitalisation journey, rather than applying uniform instruments across a highly heterogeneous enterprise population.
For economies with more structured digital governance frameworks (Albania, Kosovo, North Macedonia, Serbia and Türkiye), the focus should be on strengthening implementation capacity and ensuring that co-ordination platforms translate strategic priorities into operational programmes, supported by clearer monitoring systems and regular reporting on SME digital transformation outcomes.
For economies with less structured digital governance arrangements, priority should be given to establishing formal co-ordination mechanisms or lead institutions responsible for SME digital transformation, with a mandate to align policy objectives, funding streams and implementation tools across ministries responsible for digitalisation, innovation and SME development.
Expand accessible, demand-driven financial instruments that support SMEs across the full digitalisation trajectory, and reflect differences in firm size, sector and digital maturity. While financial support for SME digitalisation is gradually expanding, existing instruments remain unevenly distributed across stages of digital maturity and are not consistently accessible to less digitally advanced firms. Governments should pursue a more balanced instrument mix: scaling up small grants and demand-driven digitalisation vouchers to lower the threshold for initial adoption among less digitally mature SMEs while simultaneously developing more sophisticated instruments, including low-interest loans for IT infrastructure, integrated finance-and-advisory packages, and “test before invest” mechanisms. The effectiveness of demand-driven instruments depends on the availability of a sufficiently developed local ecosystem of qualified digital service providers capable of responding to SME needs (OECD, 2021[4]). Ensuring continuity across these instruments is critical: support should be structured to accompany firms progressively from initial adoption to more advanced transformation stages, rather than being delivered through isolated schemes. Reducing dependence on externally financed programmes requires building domestically anchored financing frameworks, including through dedicated budget lines, development bank partnerships and private co-financing arrangements, to deliver predictable and scalable support over time.
Develop targeted SME workforce development programmes to strengthen firm-level digital absorptive capacity. Despite widespread integration of digital skills in education and labour market strategies, practical instruments supporting SMEs in upgrading workforce capacities at the firm level remain limited. Dedicated SME-oriented programmes are needed to close this gap, including modular training courses, digital apprenticeships and work-based learning schemes delivered through vocational institutions, business support organisations and industry partnerships. To maximise their value for SMEs, such programmes should be highly practical and flexible in format; grounded in day-to-day business realities; and designed to be directly applicable to the specific tools, processes and workflows that participating firms use in their operations. Co‑financed advisory services should also be expanded to support SME managers in translating digital investments into operational and organisational improvements (Box 3.1). Strengthening alignment between education systems, labour market institutions and SME support organisations is necessary to close the gap between general digital literacy provision and the firm-level absorptive capacity that deeper digital transformation requires.
Latvia has sought to increase employer investment in workforce skills development through a co‑ordinated policy package combining financial incentives, regulatory tools and capacity-building measures. Implemented with support from the European Union’s Technical Support Instrument, the initiative aims to address the low levels of enterprise training by reducing financial, informational and co‑ordination barriers, particularly among small and medium-sized enterprises (SMEs).
The Latvian approach is built around several complementary elements:
Financial incentives for training: Enterprises can access subsidised training projects funded by EU Structural Funds, as well as tax exemptions on training expenditures. These measures help reduce the direct cost of employee training, which is a key barrier for SMEs.
Training vouchers and active labour market programmes: The State Employment Agency provides vouchers for training, including digital and online courses, supporting unemployed individuals and workers at risk of displacement.
Employer-centred support instruments: The policy package includes tools such as additional training agreements, payback clauses and planned sectoral skills funds, which pool resources across firms to co-finance training and reduce the risk of employee poaching.
Capacity-building and co-ordination measures: The reform emphasises the role of diagnostic tools, coaching, competence centres, and co-operation between enterprises and education providers, recognising that financial incentives alone are insufficient without support for organisational learning and skills planning.
Latvia’s experience shows that improving enterprise training requires a balanced mix of financial support, regulatory incentives and institutional co-ordination, illustrating how integrated policy packages can stimulate SME investment in workforce skills and support more sustained, productivity-enhancing digital transformation.
Sources: OECD (2022[16]); European Commission (2022[17]).
Strengthen the diagnostic and evidence base for SME digital transformation to support more targeted policy design. OECD findings point to limited firm-level evidence on digital capacity gaps, weak outcome-oriented monitoring and an over-reliance on self-reported constraints, which may underestimate the scale of support needed. Addressing these shortcomings requires action across three complementary areas. First, governments should strengthen diagnostic tools by systematically assessing SME digital maturity, including through regular enterprise surveys that go beyond basic ICT usage to capture the depth of digital integration, organisational readiness and productivity effects. Second, monitoring frameworks should place a greater emphasis on firm-level outcomes, with indicators linked to measurable targets within strategic frameworks, enabling authorities to assess the effectiveness of support instruments and identify structural gaps. Third, stronger feedback loops between programme design and business performance should be established to ensure that policy responses are continuously adjusted based on evidence, rather than driven by assumptions about SME needs.
Once the foundational conditions for digital adoption are established, the central question shifts from access to impact: whether digitalisation translates into measurable productivity gains for SMEs. Evidence shows that productivity improvements depend less on the mere use of digital tools and more on how effectively firms integrate them into their core business functions, including sales, innovation, organisational processes and market expansion (OECD, 2023[13]; 2021[4]).
The expansion of e-commerce and digital business models, in particular, has strengthened SMEs’ ability to reach new customers, diversify revenue streams and increase operational efficiency. Productivity gains thus depend not on digital presence alone, but on how effectively online sales activity, innovation and internal process upgrading are combined to enable firms to scale and compete in digitalised value chains (OECD, 2024[18]; 2021[19]).
This section examines how e-commerce adoption and firm-level innovation contribute to SME productivity across the WBT region, and whether current policy and ecosystem conditions are sufficient to support the transition from operational digital use toward more transformative, market-expanding outcomes.
3.2.1. Leveraging the use of e-commerce and online platforms to drive SME growth
E-commerce represents one of the most direct channels through which digital transformation can translate into measurable productivity gains for SMEs. When integrated into core business operations rather than deployed as a complementary or ad hoc activity, online sales can reduce transaction costs, expand customer reach and generate data that support more informed strategic decisions (OECD, 2023[20]; 2025[21]). SMEs that combine physical and digital sales channels tend to achieve stronger efficiency gains and have greater resilience, particularly as digital platforms increasingly shape trade patterns and value chain participation (OECD, 2023[20]). Evidence from the EU retail sector illustrates the scale of this opportunity and the unevenness of its realisation: between 2013 and 2023, e-commerce adoption among retail SMEs nearly doubled from 23% to 43%, yet uptake of more advanced tools such as CRM systems remained limited, and EU firms using web technologies tend to show stronger performance than those that do not (OECD, 2026[22]). However, transitioning to integrated e-commerce models is not straightforward: it requires organisational adjustments, including changes to logistics, payment systems, customer service processes and data management, that many SMEs find difficult to manage alongside day-to-day operations (OECD, 2026[22]).
A gap persists between formal General Data Protection Regulation compliance and effective data governance in SMEs
Progress in regulatory modernisation across the WBT region should be understood across two related but analytically distinct dimensions. The first concerns alignment with the EU acquis (the adoption of legislation governing e-commerce transactions, electronic identification, digital signatures and payment services in line with EU frameworks such as the Electronic Identification, Authentication and Trust Services Directive [eIDAS] and and the revised Payment Services Directive [PSD2]), which facilitates cross-border transactions and regulatory interoperability. Several economies have made meaningful progress in this regard: Albania, Montenegro, North Macedonia and Serbia have updated their core legislation, strengthening the legal framework for cross-border online transactions. Kosovo has similarly adopted legislation on information society services, electronic identification and data protection that is partially aligned with EU regulatory principles.
The second dimension relates to domestic regulatory modernisation (updates to marketplace regulation, licensing requirements and platform governance rules), which reflects economy’s policy priorities but does not necessarily constitute alignment with the acquis. Türkiye illustrates this distinction: its e-commerce framework has been substantially strengthened through marketplace regulation and updated payment service rules, representing significant domestic regulatory development, while formal alignment with the acquis remains partial, highlighting that regulatory progress can follow different pathways, with distinct implications for cross-border integration. By contrast, Bosnia and Herzegovina remains the only WBT economy without an e-commerce law, and while reform efforts have recently accelerated at the entity level, including a draft law under development in the Federation of Bosnia and Herzegovina and recent consumer protection updates in Republika Srpska, the division of regulatory responsibilities across state and entity levels has contributed to a slower overall pace of reform.
Across these two dimensions, progress has been concentrated in framework modernisation, while implementation capacity has advanced more slowly. This gap is particularly visible in the limited development of monitoring systems tracking SME engagement in digital trade. Most WBT economies do not systematically monitor SME engagement in e-commerce or its contribution to firm performance. While some economies track basic indicators such as the share of SMEs selling online or adopting digital tools, including Albania, North Macedonia, Serbia and Türkiye, others report limited or no available benchmarks for these measures (Table 3.3). Indicators linking digital adoption to SME productivity performance are particularly scarce across the region, highlighting a broader evidence gap that constrains governments’ ability to assess the economic impact of SME digital transformation and calibrate policy responses accordingly.
Notes:
1. ERP: enterprise resource planning; CRM: customer relationship management.
2. Tracked as a part of different strategies of the Federation of Bosnia and Herzegovina.
3. Tracked by the Institute for statistics of Republika Srpska as a use of computer and use of social networks but without any segmentation by type of digital tools used.
4. Not tracked through a dedicated statistical framework but assessed qualitatively based on project-level evidence, including outcomes from initiatives such as the Digital Advisors for SMEs programme and digital skills training schemes.
Source: Information provided by the governments of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, and Türkiye during the 2026 assessment cycle.
SME engagement in e-commerce across the WBT region remains limited despite recent improvements in the regulatory environment
OECD survey evidence suggests that SMEs in the WBT region have not yet fully leveraged e-commerce as a channel for growth and market expansion. On average, about 33% of surveyed SMEs report no engagement in e-commerce (OECD, forthcoming[2]). While the headline share of WB62 SMEs selling online is broadly comparable to the EU average (21% and 19%, respectively), e-commerce turnover in the region remains considerably weaker (5.3% in the WB6 and 12% in the European Union) (Regional Cooperation Council (RCC), 2024[23]), suggesting that participation in online sales does not translate into equivalent commercial depth or scale and monetisation of e-commerce remains limited. OECD survey findings also show that even where online sales occur in the WBT region, SMEs are often confined to basic channels such as social media or firm websites rather than scalable marketplace platforms (OECD, forthcoming[2]). While website presence among WB6 businesses has been improving, this has not consistently translated into more digital transactions or increased cross-border commercial activity (Regional Cooperation Council (RCC), 2024[23]). In parallel, participation in third-party marketplaces remains very low across most WBT economies, suggesting that structured and cross-border e-commerce models are still underdeveloped (OECD, forthcoming[2]). This limited progression is not only a supply-side challenge: low consumer trust in online payments, relatively weak use of digital payment instruments and limited awareness of consumer rights in e-commerce reduce the depth of the online market itself, lowering SMEs’ incentives to invest in more structured and scalable digital sales models (OECD, 2025[15]). These findings indicate that regulatory modernisation is a necessary but insufficient condition for widespread SME e-commerce adoption and that complementary measures (e.g. supporting firms in developing digital sales capabilities, navigating platform ecosystems where fees and visibility rules can affect SMEs’ ability to compete and scale, and accessing cross-border markets) are needed to translate policy efforts into direct outcomes for SMEs.
3.2.2. Fostering innovation and collaboration for SME productivity
Digitalisation enhances SME productivity not only through expanded market access, but through its interaction with innovation and knowledge diffusion at the firm level. SMEs that combine digital tools with product, process or organisational innovation tend to have stronger productivity gains, higher resilience and greater growth potential, as innovation enables technologies to be embedded into core business models rather than layered on top of existing processes (Hall, Lotti and Mairesse, 2012[24]; Mohnen, Polder and Van Leeuwen, 2018[25]). However, these gains are consistently uneven: firms with stronger managerial capabilities, workforce skills and access to finance are better positioned to leverage digital technologies for innovation while less-prepared SMEs remain confined to incremental improvements (McAfee and Brynjolfsson, 2011[26]). Across OECD and EU countries, this dynamic has contributed to widening productivity gaps between frontier and lagging firms, reinforcing the importance of policy frameworks that enable broad‑based digital innovation rather than concentrating gains among already digitally advanced enterprises (Andrews, Criscuolo and Gal, 2016[27]).
The main challenge is not the lack of digital innovation strategies, but the limited capacity to translate them into SME-level productivity gains
The main challenge in the WBT region is not the absence of digital innovation strategies, but the limited capacity to translate these strategic ambitions into productivity gains for SMEs. Digital innovation is increasingly embedded within development, industrial and smart specialisation strategies across the region, with several economies (e.g. Montenegro, North Macedonia, Serbia and Türkiye) positioning it as a central driver of competitiveness through priorities such as ICT, advanced manufacturing, AI and research collaboration. However, these frameworks largely operate at a strategic level and tend to prioritise research excellence and technology development, placing less emphasis on the instruments required to support firm-level adoption and diffusion. As a result, innovation support systems remain only partially aligned with the needs of the broader SME population. Instruments linking capacity building, financing, advisory support and commercialisation are often underdeveloped or weakly co‑ordinated, limiting SMEs’ ability to move from experimentation to scaling. In effect, the policy system lacks a clear “translation layer” linking innovation priorities to SME-level outcomes. In practice, support tends to be more accessible to technologically advanced or research-connected firms, while less mature SMEs face fewer entry points and limited support for incremental innovation and productivity upgrading.
This gap is also reflected in firm-level evidence. OECD survey findings indicate that interest in digital innovation is present among SMEs in the WBT region, with about 32% of surveyed SMEs reporting plans to adopt digital innovation in the near future (OECD, forthcoming[2]). At the same time, 37% of surveyed SMEs report moderate rather than extensive use of innovation, suggesting that where digital innovation does occur, it tends to be incremental rather than transformative. These patterns suggest that the barriers to deeper digital innovation among SMEs lie less in awareness or ambition than in the practical conditions needed to act on them, including access to finance, advisory support and implementation capacity, pointing to the need for more structured and integrated policy responses.
The way forward
Strengthen SME integration into structured e-commerce ecosystems by building coherent support systems that enable progression from basic online presence to scalable and cross‑border digital trade. Survey evidence indicates that many SMEs across the WBT region continue to rely on informal or low-scale online sales channels, limiting their ability to reach new markets, participate in cross-border trade or scale commercial operations (OECD, forthcoming[2]). The priority is to establish structured pathways that enable SMEs to transition from a basic online presence to integrated e-commerce models, including participation in digital marketplaces and the adoption of interoperable payment, logistics and platform solutions (Box 3.2). This requires aligning advisory support, capacity building and market access mechanisms within a coherent delivery framework.
For economies where regulatory frameworks are broadly aligned with EU standards (Albania, Montenegro, North Macedonia, Serbia and Türkiye), focus on the implementation support and SME capacity building. This includes developing practical guidance and onboarding support to help SMEs navigate existing digital trade frameworks, select appropriate payment and logistics solutions, and access domestic and cross-border marketplaces. Support should be co-ordinated across SME agencies, chambers of commerce and marketplace platforms, and complemented by publicly accessible inventories of interoperable e-commerce solutions, covering payment, invoicing, delivery and platform integration, to further reduce the information and search costs that deter less digitally experienced firms from adopting scalable online sales models.
For economies where e-commerce legislation remains incomplete or fragmented (Bosnia and Herzegovina and, to some extent, Kosovo), prioritise legislative consolidation alongside practical SME support measures, including advisory services, marketplace onboarding programmes and accessible e-commerce toolkits, to ensure that legal improvements translate into tangible firm-level capacities rather than remaining confined to the regulatory layer. Strengthening monitoring systems is essential to track SME participation in e-commerce, including marketplace use, cross-border sales and links to firm performance, enabling support measures to be continuously adjusted.
As part of its COVID-19 response, France introduced an E-commerce Recovery Plan led by the Ministry of the Economy, Finance and Recovery, aimed at helping small and medium-sized enterprises (SMEs) overcome practical barriers to online sales. The initiative focused on enabling conditions for e‑commerce adoption rather than awareness-raising alone. The key elements of the approach included:
A centralised, practical e-commerce guide for SMEs, providing step-by-step instructions on setting up or improving websites, using online marketplaces, managing digital payments, organising logistics and delivery, and communicating with customers online.
Integration with the national digital portal, France Num, which hosts thematic guidance, links to specialised tools and SME case studies illustrating effective e-commerce adoption.
A co-ordinated call to private sector platform and service providers to offer free or preferential access to e-commerce services for SMEs, including website development, marketplace access, payment solutions, communication tools and logistics services.
A public inventory of interoperable solutions allowing SMEs to identify suitable digital payment, invoicing and delivery tools in a transparent and comparable way.
A focus on reliable order fulfilment, with particular attention to payments, logistics and last‑mile delivery, which were recognised as critical bottlenecks for SMEs’ participation in online markets.
France’s experience shows how governments can strengthen the enabling environment for SME e‑commerce by co-ordinating platforms, infrastructure and guidance, rather than relying solely on training or promotional campaigns.
Sources: French Ministry of Economy, Finance, and Industrial and Digital Sovereignty (2025[28]; 2020[29]); French Directorate General for Enterprise (2020[30]).
Strengthen innovation support systems to enable SMEs to translate digital innovation into scalable and productivity-enhancing outcomes. While digital innovation is widely embedded in strategic frameworks across the WBT region, existing support systems do not consistently enable SMEs to move from experimentation to scaling and commercialisation. The core gap is that support instruments are rarely designed to accompany firms progressively in their digital innovation journey, from identifying opportunities to testing, scaling and bringing solutions to market. Innovation support should, therefore, be structured as a coherent and progressive pathway, combining capacity building, financing, advisory support and collaboration mechanisms. This includes expanding access to innovation vouchers enabling SMEs to access specialised expertise from research organisations and technology providers, “test-before-invest” programmes providing access to prototyping facilities and demonstration environments, and advisory schemes supporting firms in identifying digital innovation opportunities and bringing new solutions to market while ensuring that these instruments are connected and designed to accompany firms from initial experimentation through to commercialisation and scaling. A particular emphasis should be placed on continuity across support measures, enabling SMEs to build on early-stage innovation and integrate it into their core business processes.
As SMEs deepen their reliance on cloud computing, e-payments, digital platforms and data-driven business models, digital risks become increasingly intertwined with firm performance and competitiveness. While digitalisation creates opportunities for market expansion and innovation, it also heightens exposure to data breaches, cyberattacks and regulatory compliance challenges. SMEs are particularly vulnerable, as limited financial resources, informal internal procedures and scarce specialised staff constrain their ability to implement structured data governance and cybersecurity practices (OECD, 2021[4]; Bianchini, 2025[12]). At the same time, gradual alignment with the European Union’s digital trust and security framework is raising baseline expectations for data protection and cyber resilience, making compliance and risk management increasingly central conditions for participation in digital markets and cross-border value chains (European Commission, 2024[31]).
While most WBT economies have introduced legislation broadly aligned with EU standards and established supervisory or cybersecurity authorities, implementation gaps persist, particularly in translating formal obligations into practical, affordable and proportionate support for smaller firms. This section examines the regulatory frameworks, institutional arrangements and enterprise-level practices shaping SME data protection and cybersecurity readiness across the WBT region.
3.3.1. Adapting data protection to evolving digital threats
The protection of personal and commercial data has become a central pillar of digital trust and a practical condition for SME competitiveness. Robust data protection frameworks clarify rights, responsibilities and accountability mechanisms in data-intensive markets, strengthening confidence among customers, business partners and public authorities (European Data Protection Board (EDPB), 2025[32]). Smaller firms are particularly exposed to data breaches due to limited technical and organisational capacity, and even an isolated incident can generate substantial financial, operational and reputational damage (Vergara Cobos and Cakir, 2024[33]; KPMG, 2016[34]). Effective data governance is, therefore, not only a matter of regulatory compliance, but also a prerequisite for maintaining customers’ trust and enabling secure participation in digital value chains.
A gap persists between formal General Data Protection Regulation compliance and effective data governance in SMEs
EU accession dynamics, including approximation requirements and alignment with the General Data Protection Regulation (GDPR), have driven significant legislative progress across the WBT region. Several economies (e.g. Albania, Bosnia and Herzegovina, and North Macedonia) have adopted new or substantially revised GDPR-inspired legislation, strengthening data subject rights, clarifying obligations for controllers and processors, and introducing stricter breach notification and accountability requirements. Others, like Kosovo and Serbia, operate earlier generation frameworks that are broadly aligned with GDPR principles but now face updating or implementation challenges. As reflected in Table 3.4, regulatory convergence with EU data protection standards is advancing across the region, though differences in institutional capacity and resources constrain consistent enforcement.
Notes:
1. Monitoring and evaluation mechanisms in Türkiye operate primarily at the overall data protection and cybersecurity policy level rather than being specifically tailored to SMEs.
2. In Kosovo, monitoring is conducted by the Information and Privacy Agency through annual reports, but it applies to all data controllers and is not SME-specific.
3. Monitoring and evaluation are assessed as “advanced” only where structured monitoring frameworks with defined indicators and evaluation mechanisms are in place. Monitoring may apply to all organisations including SMEs; however, general regulatory oversight without systematic monitoring or evaluation mechanisms is not considered advanced monitoring.
4. Bosnia and Herzegovina has a multi-level governance structure. Data protection legislation and supervision are regulated at the state level, while SME policy design and support mechanisms are largely implemented at the entity level (Federation of Bosnia and Herzegovina and Republika Srpska). As a result, the availability of SME support mechanisms may differ between levels of government.
Source: Information provided by the governments of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, and Türkiye during the 2026 assessment cycle.
Despite this legislative progress, data protection frameworks remain predominantly horizontal in design, with limited differentiation of compliance pathways according to firm size or capacity. Few economies (e.g. Albania and Serbia) have introduced SME-specific compliance guidance, simplified toolkits or proportionate implementation mechanisms that reflect smaller firms’ resource constraints. At the same time, supervisory authorities in several economies (e.g. Bosnia and Herzegovina and Montenegro) face capacity constraints that limit proactive business outreach and the provision of tailored compliance support. As a result, formal regulatory alignment does not consistently translate into effective firm-level data governance. OECD survey evidence suggests that while around 71% of SMEs report having a data privacy policy in place, indicating relatively widespread formal compliance, adoption varies considerably across economies, ranging from 59% in Bosnia and Herzegovina to 81% in Montenegro (OECD, forthcoming[2]). Critically, the presence of a formal policy does not necessarily reflect effective data governance practices. In the region, an average of 15% of surveyed SMEs report uncertainty regarding how their data are stored or managed, indicating that compliance frequently remains procedural rather than embedded in day-to-day business operations. This points to a structural gap that legislative alignment alone cannot close: translating formal regulatory progress into meaningful firm-level data governance requires more targeted outreach, practical guidance and capacity-building support directed at smaller firms.
3.3.2. Strengthening SME cybersecurity resilience
The growing digitalisation of business operations has significantly expanded the attack surface for cyber threats targeting SMEs. Cyber incidents tend to affect smaller firms more severely than larger enterprises, as SMEs often lack dedicated IT staff, structured risk management systems and the financial buffers needed to absorb operational disruptions (OECD, 2021[4]). Beyond direct financial losses, weak cybersecurity can also function as a market barrier: firms unable to demonstrate adequate security safeguards risk exclusion from public procurement, cross-border value chains and partnerships with larger companies applying stricter digital security standards (OECD, 2023[11]). Strengthening SME cybersecurity is, therefore, not only a matter of mitigating technical risks, but a prerequisite for sustaining competitiveness, trust and market access in increasingly regulated and interconnected digital ecosystems.
Cybersecurity systems are strengthening, but policy transmission to SMEs remains limited
Cybersecurity capacity across the WBT economies reflects differing stages of institutional development and strategic co-ordination, rather than simply variation in performance. According to the National Cyber Security Index, Albania, North Macedonia, Serbia and Türkiye demonstrate relatively advanced preparedness, supported by more developed strategic frameworks, operational structures and technical capabilities (National Cyber Security Index (NCSI), 2026[35]). Montenegro occupies an intermediate position, while Bosnia and Herzegovina and Kosovo remain at earlier stages of their cyber system development. These differences point not only to varying levels of strategic ambition, but more fundamentally to the uneven consolidation of core cybersecurity functions, including incident response, co-ordination and risk management.
Across the WBT region, most economies have established the foundational elements of cybersecurity systems. Dedicated strategies are in place in Albania, Kosovo, Montenegro, North Macedonia, Serbia and Türkiye, typically recognising the role of the private sector and emphasising awareness-raising, public-private co-operation and resilience building (Table 3.5). Computer emergency response team (CERT) or computer security incident response team (CSIRT) structures have also been set up in most cases, providing incident response capabilities as well as technical alerts and general guidance to businesses. At this stage, policy efforts remain primarily oriented towards strengthening institutional capacity and protecting critical infrastructure, a sequencing that is consistent with international practice and reflects the logic underpinning the European Union’s Network and Information Security 2 Directive (NIS) and NIS2 Directives, which similarly establish the protection of essential services and critical entities as a first-order priority. In this respect, the overall direction of reform across the region is well-aligned with the EU framework. As these systems mature, the more pertinent question is whether cybersecurity frameworks are evolving beyond this foundational phase to systematically encompass the broader business ecosystem. In the WBT region, this second phase remains at an early stage. While CERT and CSIRT structures provide a growing volume of technical information and awareness materials, these resources are generally designed for a broad audience and do not systematically translate into actionable, firm-level guidance for SMEs. Dedicated support mechanisms such as tailored advice, sector-specific tools or advisory services adapted to smaller firms remain limited across most economies in the region.
OECD survey evidence suggests that this gap in policy transmission is reflected in firm-level outcomes. Although around 81% of SMEs report adopting at least one basic cybersecurity measure, protection remains concentrated in entry-level tools such as passwords or antivirus software (OECD, forthcoming[2]). At the same time, a non-negligible share of surveyed firms reports no cybersecurity measures at all, ranging from 14% in Serbia to as much as 47% in North Macedonia (OECD, forthcoming[2]). This pattern is broadly consistent with evidence from the OECD country survey, where only around 16% of SMEs demonstrate a robust level of digital security. Adoption remains concentrated in basic protections, such as passwords and two-factor authentication, while more advanced practices (including staff training, external security assessments and systematic access reviews) are far less widespread (Bianchini, 2025[12]).
Notes:
1. The strategy contains a measure to support businesses financially in cyber preparedness, but there are no details of how this would be exercised, and how SMEs would be targeted with the measure.
2. CERT: computer emergency response team; CSIRT: computer security incident response team.
Source: Information provided by the governments of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, and Türkiye during the 2026 assessment cycle.
The way forward
Strengthen SME-focused implementation mechanisms within data protection frameworks to translate formal compliance into effective data governance. While most economies have strengthened data protection legal frameworks in line with EU standards, survey evidence indicates that SME compliance frequently remains formal rather than operational, with many firms holding data privacy policies without the understanding or capacity to implement them effectively (OECD, forthcoming[2]). The priority is thus to embed practical compliance support within the design and delivery of data protection systems, ensuring that regulatory requirements can be translated into day-to-day business practices. This includes developing simplified guidance, standardised compliance templates and sector-specific toolkits that reflect the resource constraints and risk profiles of SMEs, enabling proportionate and cost-effective compliance. Supervisory authorities should strengthen co-ordination with SME support organisations, business associations and digitalisation agencies, delivering compliance support through existing business support channels rather than as a stand-alone regulatory function. Emphasis should be placed on integrating data protection guidance into broader digitalisation and business advisory services, ensuring that compliance is embedded within routine business operations.
Enable the diffusion of cybersecurity systems to SMEs through stronger delivery mechanisms, targeted support and effective incentives. Strengthening SME cybersecurity requires moving beyond centrally produced guidance towards delivery models that effectively translate frameworks into firm-level practices (Box 3.3). This includes embedding cybersecurity support within existing SME-facing ecosystems such as business advisory services, digital innovation hubs and chambers of commerce to ensure that technical guidance is adapted to operational business needs. Improving effectiveness also depends on more granular targeting of firms. Introducing segmentation frameworks based on digital maturity, sectoral exposure and risk profiles would better align support with SMEs’ actual needs, rather than relying on uniform approaches. In parallel, demand-driven instruments should be expanded to incentivise progression from basic to more systematic cybersecurity practices. These may include co-financed cybersecurity audits, integrated advisory and finance packages, and conditional support schemes linked to the implementation of concrete security improvements.
Austria’s KMU.DIGITAL programme, implemented by the Federal Ministry of Economy, Energy and Tourism in co-operation with the Austrian Economic Chambers, addresses the capacity gap between cybersecurity awareness and practical implementation among small and medium-sized enterprises (SMEs). The programme structures digital adoption as a graduated pathway, recognising that information asymmetries and upfront costs prevent smaller firms from adopting enterprise-grade security practices. IT security and data governance are embedded as core support areas, with diagnostic assessment, expert advisory services and implementation co-funding linked through conditional sequencing to reduce informational and financial barriers.
The programme’s effectiveness rests on three design features:
1. First, certified consultant-led assessments are subsidised at 80% for status and potential analysis (up to EUR 400 per tool) and 50% for strategy consulting (up to EUR 1 000 per tool), with a combined ceiling of EUR 3 000 per firm.
2. Second, implementation support is conditionally tied to prior diagnostics: firms may access implementation funding only after completing a supported consultation, preventing premature investment misaligned with organisational readiness.
3. Third, the implementation module co-funds investments and external expertise, including software licences. Since 2017, the programme has supported over 25 000 digitisation initiatives, disbursing more than EUR 25 million in grant funds.
Austria demonstrates how data protection and cybersecurity can become a repeatable SME journey through standardised diagnostics, trusted intermediaries translating legal obligations into operational practices and conditional co-funding linking implementation to demonstrated readiness.
Sources: KMU Digital (2026[36]); Digital Austria (2024[37]).
Establish targeted SME cybersecurity support instruments to operationalise strategies. Governments across the WBT region should complement existing cybersecurity frameworks with dedicated instruments that help SMEs strengthen their cyber resilience in practice. While most economies have adopted strategic frameworks recognising the importance of private sector cybersecurity, survey findings indicate that many SMEs rely primarily on basic safeguards and lack systematic cyber-risk management practices, leaving a significant share of firms exposed to preventable risks. Governments should, therefore, prioritise accessible support measures that enable SMEs to move beyond entry-level protection toward more structured and preventive cybersecurity practices.
In the economies with more advanced cybersecurity systems (Albania, North Macedonia, Serbia and Türkiye), the priority is to deepen system effectiveness by strengthening the interfaces between cybersecurity institutions (including CERT/CSIRT structures) and SME-facing support networks, ensuring that existing capacities translate into firm-level adoption at scale.
In the economies at earlier stages of system development (Bosnia and Herzegovina and Kosovo, with Montenegro in transition), efforts should continue to focus on consolidating core institutional capacities while simultaneously embedding basic transmission channels to SMEs early on to avoid a structural gap between system development and business uptake.
As SMEs move beyond basic digital adoption, the key question becomes whether they can integrate advanced technologies in ways that strengthen productivity and competitiveness while remaining economically and environmentally sustainable. Technologies such as AI, the Internet of Things, advanced data analytics and automation are increasingly reshaping how firms innovate, optimise production processes and develop new products and services (OECD, 2023[38]). Yet their diffusion remains uneven, as SMEs often face binding constraints, including limited financial resources, shortages of specialised skills and weaker organisational capacity to manage complex technological change that slow adoption relative to larger firms change (OECD, 2026[39]; 2025[40]). These technologies also introduce new governance and sustainability challenges, including cybersecurity risks and the growing environmental footprint of energy‑intensive digital systems, making the green-digital transition an increasingly central dimension of SME technology policy (OECD, 2024[41]; IEA, 2023[42]).
Across the WBT region, governments are increasingly recognising the strategic importance of emerging technologies and the green-digital transition, but SME-oriented support frameworks remain largely underdeveloped. This section examines how SMEs in the WBT region are adopting AI and emerging technologies and the extent to which policy instruments support a sustainable and energy-efficient uptake, identifying progress made and remaining bottlenecks.
3.4.1. Encouraging SME adoption of artificial intelligence and emerging technologies
AI and other emerging digital technologies are increasingly reshaping how firms organise production, deliver services and take operational decisions, creating new opportunities for efficiency gains, innovation and data-driven business models (OECD, 2022[43]). The emergence of generative AI has significantly lowered barriers to adoption, enabling SMEs to access AI tools at a lower cost and with fewer technical requirements than earlier generations. As a result, nearly a third of SMEs across OECD Member countries now report using such tools (OECD, 2025[44]). Effective adoption, however, requires complementary assets that many SMEs still lack, including robust data infrastructure, digital and managerial skills, and the organisational capacity to integrate advanced tools into core business processes (OECD, 2021[4]). As a result, SME engagement with emerging technologies frequently remains limited to basic or off-the-shelf applications, while more transformative gains tend to occur only where SMEs are supported by targeted policy measures and capacity-building initiatives.
Policies increasingly reference AI and emerging technologies, but SME pathways from experimentation to integration remain underdeveloped
Across the WBT region, strategic frameworks increasingly recognise AI and other emerging digital technologies as drivers of productivity growth and structural transformation. These priorities are typically embedded within broader digitalisation, innovation or industrial policy frameworks, with a strong emphasis on ecosystem development, research capacity and technology-intensive sectors. However, this policy model remains predominantly supply- and ecosystem-oriented and does not yet provide structured pathways for SMEs to adopt and integrate emerging technologies into their core business operations. While existing frameworks acknowledge the importance of private sector uptake, they rarely translate this ambition into mechanisms that support firms in identifying use cases, experimenting with technologies and scaling their application. As a result, a common structural bottleneck emerges across the region: the absence of effective transmission channels between innovation systems and the SME base. Existing policy approaches tend to prioritise upstream enablers such as R&D, innovation infrastructure, and regulatory alignment while placing less emphasis on downstream adoption processes at the firm level, such as helping firms identify relevant use cases, providing hands-on implementation support or facilitating access to demonstration environments where technologies can be tested in a business context. Intermediary actors capable of translating technological capabilities into operational business solutions, including digital innovation hubs, advisory services or sectoral networks, remain insufficiently mobilised for this purpose.
This gap is reflected in firm-level engagement with emerging technologies. OECD survey findings show that about 41% of surveyed SMEs in the WBT region report using some form of AI, in line with the OECD sample average (OECD, forthcoming[2]; Bianchini, 2025[12]). However, this headline figure masks important qualitative differences in how technologies are used. In most cases, adoption is limited to accessible, general purpose tools, particularly generative AI applications used for content creation, translation or information retrieval. By contrast, more advanced applications, including machine learning models or custom AI systems, remain rare in the WBT. Beyond AI, engagement with other emerging technologies remains very limited across the region: blockchain is used by around 2% of surveyed SMEs, the Internet of Things by about 10%, while more than 82% report not using any other form of emerging technologies (OECD, forthcoming[2]). Taken together, these patterns suggest that engagement with emerging technologies in the WBT region is characterised by broad but shallow adoption. SMEs are increasingly exposed to and experimenting with these tools, but lack the capabilities, support structures and incentives required to integrate them into their core business processes. These figures are broadly consistent with patterns observed across a sample of OECD Member countries, where adoption of data‑dependent and advanced digital technologies also remains low and concentrated among larger, more digitally mature firms (Bianchini, 2025[12]).
3.4.2. Promoting a sustainable digital transformation
As digitalisation and digital transformation progress, interaction with environmental performance is becoming an increasingly important determinant of SME competitiveness. In practice, digital technologies are already enabling firms to improve energy efficiency, optimise resource use and reduce operational costs, thereby supporting more sustainable business practices and facilitating compliance with evolving environmental standards (OECD, 2024[5]; 2023[11]). However, these benefits are accompanied by growing environmental trade-offs. The expansion of data-intensive applications and digital infrastructure is increasing electricity demand, highlighting that digitalisation can simultaneously support and strain environmental performance if not accompanied by appropriate efficiency and sustainability measures (OECD, 2024[5]). Aligning digital upgrading with sustainability objectives is, therefore, not only an environmental imperative, but an increasingly important factor in ensuring that SME digital transformation contributes to long-term productivity and resilience. This alignment is further supported by evidence showing a positive correlation between energy and labour productivity, suggesting that significant efficiency gains remain within reach (De Lyon and Dechezleprêtre, 2025[45]) and that digital upgrading, when well-governed, has the potential to reinforce resource efficiency and overall firm performance.
The environmental footprint of SMEs’ digital transformation remains insufficiently addressed
Across the WBT region, digital transformation is not yet systematically steered towards environmentally sustainable outcomes. While sustainability considerations are increasingly acknowledged in policy discussions, they remain weakly embedded in the design of digitalisation frameworks, particularly in relation to how digital technologies are selected, used and managed at the firm level. As a result, environmental impacts are rarely integrated into SMEs’ digital investment decisions, and the sustainability of digital use remains largely unaddressed in practice.
SME-level evidence from the OECD survey points to a clear gap between awareness and structured implementation. Only around 25% of surveyed SMEs in the WBT region report having a formal strategy or action plan to reduce their environmental footprint, while 15% indicate no intention to adopt such measures (OECD, forthcoming[2]). Although nearly half of firms report plans to develop such strategies, this reflects emerging awareness rather than established practice. Environmental monitoring practices further highlight the early-stage nature of sustainability management. While over half of surveyed SMEs track energy consumption (52%), more advanced practices remain limited: 37% track energy efficiency, and just over 10% monitor their carbon footprint, while more than 20% of firms does not track any environmental indicators (OECD, forthcoming[2]). This indicates that most surveyed SMEs lack the capacity or incentives to assess and manage the broader environmental implications of their activities. Similar patterns of low carbon footprint tracking and limited adoption of digitally enabled sustainability practices (e.g. eco-friendly packaging, waste tracking, sustainable sourcing and water use monitoring) are observed across OECD countries (Bianchini, 2025[12]), suggesting that this is not only a regional gap, but a broader structural challenge affecting SME digital sustainability.
At the level of ICT use, the evidence reveals a pronounced life cycle inconsistency in sustainable digital practices. While around 72% of surveyed SMEs report considering the environmental impact of ICT equipment and services when taking procurement decisions, this awareness does not translate into consistent practices across the full life cycle of digital technologies. Only around one-third of surveyed SMEs use dedicated electronic waste channels to dispose of ICT equipment while an equal share retains obsolete equipment (often due to data security concerns) and a further 28% reports uncertainty about how unused devices are ultimately handled (OECD, forthcoming[2]). In parallel, only 7% of SMEs report disposing of ICT equipment with general non-recyclable waste (OECD, forthcoming[2]). These patterns suggest that procurement stage environmental awareness has not yet translated into structured end-of-life practices, pointing to a gap between stated intentions and actual behaviour across the full digital technology life cycle.
More broadly, SMEs in the WBT region lack access to tools, metrics and advisory support that would allow them to monitor and manage the environmental footprint of their digital activities. This limits their ability to make informed trade-offs, particularly as the expansion of data-intensive applications and digital infrastructure contributes to rising energy demand. As a result, digitalisation may generate efficiency gains in some areas while simultaneously increasing resource use in others, without a structured approach to managing these effects.
The way forward
Integrate SME adoption pathways into artificial intelligence and emerging technology policy frameworks, moving from strategic recognition to system-level delivery. Across the WBT region, strengthening SME engagement with AI requires moving beyond high-level strategic commitments towards the development of concrete adoption systems that support firms in progressing from initial exposure to effective integration. This entails explicitly embedding SME adoption pathways within AI and emerging technology frameworks, including clear implementation responsibilities, delivery mechanisms and monitoring indicators aligned with SME productivity and innovation objectives. Without such pathways, the expansion of AI use risks remaining superficial, with limited impact on productivity and a widening gap between digitally advanced firms and the broader SME population. Operationalising these pathways requires the development of experimentation and translation infrastructures that enable SMEs to identify, test and scale relevant use cases. This includes expanding access to experimentation platforms (e.g. testbeds, sandboxes); strengthening advisory services that translate technological capacities into business applications; and leveraging intermediaries such as digital innovation hubs, clusters and business support organisations to bridge the gap between innovation systems and SMEs (Box 3.4).
At the same time, scaling SME adoption of AI and emerging technologies requires appropriate safeguards to address potential risks. These include the environmental footprint associated with increased data processing and digital infrastructure, as well as risks related to data protection, algorithmic bias and the transparency of AI systems. In addition, growing reliance on externally developed technologies may create dependencies and limit firms’ control over critical digital capacities. Policy frameworks should, therefore, ensure that support for SME adoption is aligned with principles of responsible, secure and sustainable use, including through guidance, standards and awareness measures adapted to smaller firms.
For economies where artificial intelligence strategies or related frameworks already exist or are under preparation (Albania, Montenegro, North Macedonia, Serbia and Türkiye), the priority is to strengthen implementation by embedding these delivery mechanisms in existing frameworks, ensuring that strategic objectives translate into actionable SME adoption pathways at scale.
For economies where artificial intelligence frameworks are underdeveloped or absent (Bosnia and Herzegovina and Kosovo), efforts should focus on establishing foundational policy frameworks that integrate SME adoption from the outset, including the identification of sectoral use cases, co-ordination with SME support systems, and early development of experimentation and advisory infrastructures.
Germany’s artificial intelligence (AI) strategy combines a strong emphasis on trustworthy, human‑centred AI with a clear focus on small and medium-sized enterprises (SMEs). Since the launch of its AI Strategy in 2018, public funding has increased from EUR 3 billion to EUR 5 billion by 2025, with implementation co-ordinated across ministries to translate research excellence into practical SME adoption.
Germany’s approach centres on lowering technical and skills barriers for SMEs through shared infrastructure and applied support:
AI Factories and compute access: As a host of the EuroHPC AI Factories, Germany provides SMEs with access to advanced computing and expertise. The Jupiter AI Factory, linked to Europe’s first exascale supercomputer, and HammerHAI at the High Performance Computing Center at the University of Stuttgart offer cloud-based access to AI tools, curated datasets, pre-trained models and hybrid AI simulation workloads, enabling SMEs to experiment without heavy upfront investment.
AI service centres (since 2022): Four centres provide SMEs with advisory support and computing resources for applied AI use cases, particularly for firms lacking in-house AI capacity.
Targeted funding programmes: The KI4KMU programme supported SME-led AI innovation with grants covering up to 50% of project costs, while the “Generative AI for SMEs” programme (EUR 30 million, launched in 2025) targets concrete applications such as predictive maintenance, automated design and natural language interfaces.
Hands-on skills and adoption support: AI Studios, funded by the Ministry of Labour, provide low-threshold, practical learning environments for employees, using fixed and mobile units to reach SMEs nationwide, with a target of 2 600 firms by 2026. These efforts are reinforced by Mittelstand-Digital Innovation Hubs and the Cybersecurity for SMEs initiative.
Germany’s model focuses on access rather than ownership: shared compute, applied testbeds, co‑funded projects and worker-centred learning environments enable SMEs to adopt AI incrementally, manage risk and build internal capacities without large upfront investments.
Source: OECD (2025[40]).
Embed environmental sustainability across the life cycle of digital technologies in SME digitalisation policies. Policy efforts should focus on three priority levers across the ICT life cycle:
1. Procurement: Introduce guidance, standards and labelling schemes to help SMEs assess the environmental footprint of digital equipment and services and integrate sustainability criteria into public digitalisation support schemes.
2. Use: Support SMEs in improving the energy efficiency of digital operations through monitoring tools, advisory services and incentives for resource-efficient digital solutions.
3. End-of-life: Expand access to trusted recycling and disposal channels, including solutions that address data security concerns and facilitate responsible management of obsolete equipment.
Across all stages, governments should strengthen decision-support tools, including simplified metrics and advisory services, to help SMEs integrate environmental considerations into digital investment decisions. Efforts should focus on establishing basic guidance, awareness measures and accessible recycling solutions while progressively introducing sustainability criteria into digital support policies.
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← 1. In line with constitutional competencies, SME digital transformation is overseen by the Federal Ministry of Development, Entrepreneurship and Crafts in the Federation of Bosnia and Herzegovina, and by the Ministry of Economy and Entrepreneurship in Republika Srpska.
← 2. The analysis considers the six Western Balkan economies (WB6) without Türkiye.