Using Meta-Analytic Structural Equation Modelling to Advance Entrepreneurship Research: A Study on the Liabilities of Newness and Smallness

Abstract

The current literature examining factors related to age and size leading organisations to underperform is vast and has employed multiple theoretical lenses. However, the evidence is fragmented and mixed, and the causes for underperformance remain unclear. Building on empirical findings in 62 studies and a sample of 241 effect sizes covering 20 years of research, a meta-analysis with structural equation modelling was combined to extend the knowledge of the threats of age and size to firms’ performance. Formalisation, legitimacy and organisational structure were used to test the mediation between size and age in performance. These variables are pointed out as factors associated with the threats of age and size. The results provide evidence that structure and mainly formalisation and legitimacy play a key role in mitigating the effects of the liabilities of newness and smallness. The findings provide information on how managers should take action to keep their ventures alive.