Bacteria in nature often thrive in fragmented environments, like soil pores, plant roots or plant leaves, leading to smaller isolated habitats, shared with fewer species. This spatial fragmentation can significantly influence bacterial interactions, affecting overall community diversity. To investigate this, we contrast paired bacterial growth in tiny picoliter droplets (1-3 cells per 35 pL up to 3-8 cells per species in 268 pL) with larger, uniform liquid cultures (about 2 million cells per 140 µl). We test four interaction scenarios using different bacterial strains: substrate competition, substrate independence, growth inhibition, and cell killing. In fragmented environments, interaction outcomes are more variable and sometimes even reverse compared to larger uniform cultures. Both experiments and simulations show that these differences stem mostly from variation in initial cell population growth phenotypes and their sizes. These effects are most significant with the smallest starting cell populations and lessen as population size increases. Simulations suggest that slower-growing species might survive competition by increasing growth variability. Our findings reveal how microhabitat fragmentation promotes diverse bacterial interaction outcomes, contributing to greater species diversity under competitive conditions.