The way I view tire compound and size is a combination of forward grip, and side grip.

For instance a softer compound generally will have more grip overall, but can cause issues on a high bite surface.
By using a smaller diameter you can reduce the side grip, while retaining most of the forward grip, to a point.

For stock 17.5 blinky you can run very small dia tires, as the side grip for this class isn't as demanding as it is in mod, where corner entry speeds are much higher.

Indoor track setups will work better with smaller dia tires due to the extreme grip level.
On Outdoor tracks full size tires with a rounded edge can be optimum if you're looking for maximum grip.