Why perceived size matters for agency termination

Agency size is generally assumed to be positively correlated with survival: the bigger an agency, the less likely it is to be terminated. Yet, recent research finds a very small effect of size on survival. The reason, we argue, is that it only addresses size in terms of overall operating budget – what this article calls objective size. By contrast, we use an interpretive historicist approach to show how perceived size – the meanings and beliefs of key actors concerning an agency's size – affects termination. Drawing on a case study of Australia's independent aid agency, AusAID, which endured a tumultuous history of cuts, reorganizations and rebirths, culminating in termination, we show how perceptions of the agency's size mattered. These findings both support and extend recent research showing that adaptation and reputation are critical to the survival of government agencies.