Electro-optic (EO) modulation in polymer-dispersed ferroelectric liquid crystals (FLCs) has been studied as a function of the droplet size in a confined geometry. It is found that an optimum droplet size exists for the best alignment of molecules as well as smectic layers which produces the maximum EO modulation. The alignment quality depends critically on the shape and size of FLC droplets. The stable structure formed inside the FLC droplets results from a competition between the elastic energy stored in a confined geometry and surface interactions at the FLC-polymer interface.