Seth Godin has a brilliant piece on the advantages of small companies. It seems to me that the greatest innovation in technology (particularly software) is being done by micro-companies. These are companies like 37 Signals(5 people), Robot Co-Op(7 people), and Delicious Monster(7 people).
I think that larger companies tend to be very good at stifling creativity. There are notable exceptions (Google comes to mind), but by and large this rule seems to hold. Small companies are more able (and willing) to take risks, whereas risk-taking is seen as a bad thing in many companies.
Are there are any other examples of micro-companies anyone can think of?