Liability of Smallness: What it Means and What Can Be Done in Response

The historical record contains few examples of the smaller underdog winning out over larger opponents, with examples such as David and Goliath being the exceptions rather than the rule. This paucity of examples is due in large part to the so-called liability of smallness which suggests smaller firms are more vulnerable to competition, a constraint that is especially salient for entrepreneurial firms that begin as smaller entities with less experience and resources compared to their larger competitors. The liability of smallness is further aggravated by the liability of newness where start-ups are viewed less favorably compared to longer-established firms. To gain some fresh insights into these issues, this paper provides a review of the relevant literature concerning the liability of smallness, the liability of newness, and how some real-world firms have responded to these constraints. A discussion...
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