One theory I read is that historically states got bigger only up to the limit of their ability to manage the land and force people to pay taxes.

I don't know if it's right or wrong (and to what extent, most natural systems are complex with a multitude of factors influencing them) but I can easily imagine a similar principle applying to companies.

If you wanna expand by starting an office in the next town over, you need a way to communicate with it, otherwise it's just a separate business with a cash injection to start.

So you have a point.

But the core issue stands - the power hire/fire people, determine their salary and also capture their entire economic output leads to a power imbalance.