Past research has paid little attention to why and how firms choose to reduce their size. Size reductions can come about either by a reduction in the scale of operations or a reduction in the scope of activities undertaken by the firm. We argue and show that firms are more likely to reduce the scale of their operations but less likely to reduce the scope of their activities in the event of an economic crisis. We also show that reducing scale during a crisis results in better performance than reducing it before a crisis, while reducing scope during a crisis results in worse performance than reducing it before a crisis. Furthermore, asset characteristics and industry growth trends moderate these relationships.  We test our arguments on a sample of publicly listed European firms from 2003-2014. This paper provides a boundary condition to the argument that firms primarily sell assets to reduce diversification and highlights the role played by reducing the scale of operations in a firm’s corporate strategy.