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Liability of Middleness Revisited: The Advantages for Mid-Sized Competitors in Renewable Natural Resource Industries

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  • Cruz, Alfonso
  • Reyes, Tomas
  • Vassolo, Roberto

Abstract

Size is an important antecedent of firm survival, and several studies theoretically sustain and empirically support a ‘liability of middleness’. Indeed, it is widely believed that companies should act strategically to either become large or remain small and occupy a niche position, because mid-sized firms face the strongest market selection pressures. This study challenges that logic in renewable natural resource industries. Measuring size as product-line scale and firm-level portfolio breadth, we argue that in industries characterized by cost competition, the lack of product differentiation, large capital investments, and sharp price oscillation, scale and breadth have a curvilinear effect on survival that favors mid-sized firms rather than penalizing them. An empirical analysis of the US pulp and paper (P&P) industry over the period 1970–2000 strongly supports our arguments. This study is particularly relevant for emerging economies, in which natural resource industries represent an important portion of the total economic activity.

Suggested Citation

  • Cruz, Alfonso & Reyes, Tomas & Vassolo, Roberto, 2019. "Liability of Middleness Revisited: The Advantages for Mid-Sized Competitors in Renewable Natural Resource Industries," Management and Organization Review, Cambridge University Press, vol. 15(4), pages 737-772, December.
    • Handle: RePEc:cup:maorev:v:15:y:2019:i:4:p:737-772_5
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