When Is More Better? the Impact of Business Scale and Scope on Long-term Business Survival, While Controlling for Profitability

Empirical research shows that larger businesses tend to survive longer than smaller companies. Little research, though, shows whether size confers survival advantages independent of profitability. Moreover, no prior research attempts to disentangle the benefits of scale from those of greater business scope. Thus, we lack a conceptual understanding of the underlying benefits of business size for long-term survival. We develop arguments that demonstrate independent survival benefits of both business scale and business scope, where we conceptualize scale in terms of annual sales revenue and scope in terms of product line breadth within a related business context. First, we argue that greater business scale and business scope both enhance long-term survival, independent of profitability, owing to greater availability of financial resources, organizational routines, and external ties. Second, we argue that the benefits of scale are greatest for multi-product businesses, stemming from positive interactive effects of breadth and depth. We find support for these hypotheses with data from 618 firms that operated in the U.S. medical sector between 1978 and 1995.