As the European Union (EU) and its Member States face the pressures of recession, ongoing global competition and the challenges of implementing a new knowledge economy, improving the capabilities and participation of the huge small and medium enterprise (SME) sector is vital. This is particularly true of the microfirms (less than 10 employees) that account for 93 per cent of the EU’s 25 million firms and 40 per cent of its 170 million workforce but exhibit much lower participation rates than larger organisations. Regular quarterly surveys of national samples of 600-1,000 SMEs conducted since 1990 by the Open University Business School (OUBS) and other large-scale EU and UK surveys of SMEs show near saturation use of PCs, widespread access to the Internet and increased use of networked computers, mobile telephony, palmtops and so on. ICT is also seen as opening new possibilities for accessing information, supporting e-learning and developing new business opportunities for SMEs. Yet, once again, SME participation is very low, particularly among the microfirms and there is little evidence that the use of information and communications technologies (ICT) has led to an increase in innovation or the emergence of new business models among SMEs. The most common reasons given by SME owners include lack of time, inconvenient access and low relevance. Government surveys also identify a generally low level of ICT skills, especially among the microfirms.

This paper examines the effects of increased ICT-adoption on SME acquisition of knowledge necessary for survival, growth and success in the new economy, the development of e-business and whether ICT mediated e-learning and knowledge transfer holds the solutions for acquiring these necessary competences and skills, and overcoming the common SME participation barriers.