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The mechanisms of size-dependent efficiency and efficiency droop of blue InGaN micro-pixel light emitting diodes (μLEDs) have been investigated experimentally and by simulation. Electrical characterisation confirms the improvement of current spreading for smaller μLEDs, which enables the achievement of the higher efficiency at high injection current densities. Owing to the higher ratio of sidewall perimeter to mesa area of smaller μLEDs, a lower efficiency was observed at a low injection current density, resulting from defect-related Shockley-Read-Hall non-radiative recombination. We demonstrate that such sidewall etch defects can be partially recovered by increased thermal annealing time, consequently improving the efficiency at low current densities.