How does a small active region contribute to good lasers?
Gain in a semiconductor laser is a function of carrier density, or number of carriers per unit volume. By reducing the active volume you can increase the carrier density without increasing the number of carriers (which would require increasing the injection current).

When you reduce the active region small enough to form a quantum well, additional benefits accrue due to effectively making the band edge "sharper". This is essentially concentrating the active carriers in frequency space rather than geometrical space.