Digital Transformation and Competitiveness of SMEs in the UAE: A Review Paper on Challenges and Strategic Responses

Abstract

Small and Medium Enterprises (SMEs) are vital engines of economic growth, employment, and innovation, yet they continue to face persistent challenges that threaten their long-term sustainability, particularly in the Gulf and UAE context. This review paper highlights that SMEs in the region encounter significant barriers, including market limitations, shortages of digital skills, regulatory hurdles, and modest innovation outcomes. Moreover, although SMEs play a central role in driving non-oil growth, their overall competitiveness is constrained by fragmented resources and limited absorptive capacity. To address these challenges, several strategies emerge as critical: improving access to finance, fostering digital transformation, enhancing human capital, strengthening innovation ecosystems, and supporting internationalization. Together, these approaches have the potential to transform SMEs into resilient and globally competitive players. By situating these strategies within the UAE’s distinctive institutional and cultural environment, this paper offers both theoretical insights and practical guidance for policymakers and entrepreneurs.