Differences in large and small firm responses to environmental context: strategic implications from a comparative analysis of business formations

Despite growing recognition of some strategic advantages held by small firms, little comparative research has been performed on the advantages and disadvantages accruing to firm size. In order to delineate the differential responses of small and large businesses to their environmental context, we perform a comparative analysis of the impact of industry structural characteristics on the formation of large and small businesses in a large sample of U.S. manufacturing industries from 1977 to 1987. The results suggest that small businesses possess certain resources that allow them to overcome some barriers which create greater difficulties for their larger counterparts, as well as allow small businesses to exploit certain industry opportunities more readily than larger ones. © 1998 John Wiley & Sons, Ltd.