Small firms may lack product, industry, and geographic diversification, which add to their specific business risk.

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Small firms typically have a narrower focus and may only offer a limited range of products or services, operate in a specific industry, and serve customers in a particular geographic location. This lack of diversification increases their vulnerability to fluctuations in demand, competition, and other factors that affect their specific niche. As a result, small firms may face higher business risk than larger, more diversified companies.

Small Firms May Lack Product, Industry, and Geographic Diversification, Which