The growth of reliable III-V quantum well (QW) lasers on silicon remains a challenge as yet unmastered due to the issue of carrier migration into dislocations. We have recently compared the functionality of quantum dots (QDs) and QWs in the presence of high dislocation densities using rate equation travelling-wave simulations, which were based on 10-μm large spatial steps, and thus only allowed the use of effective laser parameters to model the performance degradation resulting from dislocation-induced carrier loss. Here we increase the resolution to the sub-micrometer level to enable the spatially resolved simulation of individual dislocations placed along the longitudinal cavity direction in order to study the physical mechanisms behind the characteristics of monolithic 980 nm In(Ga)As/GaAs QW and 1.3 μm QD lasers on silicon. Our simulations point out the role of diffusion-assisted carrier loss, which enables carrier migration into defect states resulting in highly absorptive regions over several micrometers in QW structures, whereas QD active regions with their efficient carrier capture and hence naturally reduced diffusion length show a higher immunity to defects. An additional interesting finding not accessible in a lower-resolution approach is that areas of locally reduced gain need to be compensated for in dislocation-free regions, which may lead to increased gain compression effects in silicon-based QD lasers with limited modal gain.