He also missed the fact that there might be great economies of smallness in some industries, as Apple’s transformation of the computer industry in the 1980s and the dot.com transformation of retail sales in the 1990s both showed so dramatically
The Moral Foundation of Politics by Ian Shapiro
My question is what does economy of smallness mean in this context?
The context of the statement is Marx's belief that capitalism "would become decreasingly competitive" due to the growth of companies to large size.
The author thinks that Marx missed the fact that small companies could flourish among large ones because they could take advantage of new opportunities at much less expense than large ones. An example chosen is Apple, which was very small in 1975 compared to IBM. It was less expensive for Apple to introduce a revolutionary new product, the personal computer, than for IBM to do so.
I think that quality of lower expense is what is meant by "economy of smallness".
See AHD "economy"
definitions 1 or 5.