Start-Up Size Strategy and Risk Management: Impact on New Venture Performance
Start-up size is a key strategic decision for entrepreneurs. Should entrepreneurs invest sufficient resources to start up close to minimum efficient scale in order to optimize performance or should they seek to manage risk and start-up on a smaller scale? Previously, this strategic decision appeared to be one of simply making a choice between a higher risk/reward larger start-up versus a lower risk/reward smaller scale start-up. However, recent case study based research on the relationship between risk management and performance indicates that in situations of greater uncertainty and where innovation is incremental, a lower-risk small start-up size can enable greater reward through enhanced post start-up flexibility and agility.