To understand the extent to which micro-enterprises in the care sector perform better than larger care providers requires a sensitivity to issues relating to size and to the growth of enterprise within public services. The first of these issues is the focus of this chapter; the second is discussed in Chapter Three. This chapter uses size as a lens through which to examine performance and innovation within public services. Shifting fashions in the optimal size of public organisations have been central to the history of public administration. Weber's (1997) theory of bureaucracy prized the economies of scale and coordination offered by large organisations. New Public Management-type reforms sought to disaggregate large bureaucracies into smaller, self-managed units, efficiently focused on a specific task (Hood, 1991). Subsequent approaches, sometimes captured under the heading of ‘new public governance’ (Osborne, 2010), have emphasised joining back up through partnerships, networks and collaboration, if not formal mergers (Rhodes, 1997; Kooiman, 2003).

Through presenting existing research on organisational size, performance and innovation, the chapter draws attention to a paradox: research studies repeatedly affirm that it is difficult to establish a relationship between organisational size and performance or between size and innovation. However policy makers continue to play with size, in the anticipation that it will make organisations perform better or be more innovative. The chapter goes on to examine why size continues to matter, highlighting the limitations of approaches to size that focus on linear relationships between stable variables. Size is constantly shifting and subject to a range of different definitions. Of course, most terms within social science are unstable, but other organisational features – governance arrangements, for example – are better defined, legally bounded and likely to be more stable than organisational size. We must be alert to the symbolic and performative elements of size, which help to explain why size continues to play an important role in public service redesign. Having discussed these aspects, the chapter goes on to examine the role that size plays in different service sectors, highlighting the distinctiveness of the context of care.

Organisational size and performance

The extent to which small organisations perform better than larger ones has been a core question for economic theory and business studies, as well as for public management.