Robust investment in information technology (IT) played a major role in the acceleration of output and productivity growth from 1996 to 2000. Until now, however, very little was known about the extent to which small and medium-size enterprises (SMEs) were taking part in the digital economy. This report examines new evidence of how small and medium-sized businesses are faring in the new economy – their IT investment, their online activities, and the computer experience of their employees.