Conventional wisdom suggests that creating smaller autonomous units within established firms can recreate an entrepreneurial climate and encourage flexibility and innovation. However, new autonomous units may be vulnerable to liabilities of newness and small size. This issue is explored in a sample of 37 service centers in the steel distribution business. The key findings are that being embedded in an established firm does not eliminate the liabilities of newness of sub-units: there are advantages and disadvantages associated with being a small sub-unit located within a larger organization; and, when creating new autonomous sub-units, it is best to start small.