As facile as it sounds, companies generally become large by growing. If you're making money it's natural to hire more workers to increase your profits, even if that means you're making less money per worker. As your workforce gets bigger there's not enough to do on your core product, so you start to branch out... and before you know it you're where Cisco is today. "economies of scale" - aka cost synergies - only really become a reason for enlarging companies if you're talking about mergers between mature companies, long past the point where they were really economically productive.

Growth seems to be the measure of success, both for investors and entrepreneurs, so I don't see this stopping any time soon. But imagine a world where, once companies got to the 20-50 person stage, they started paying dividends rather than expanding. There are probably other limiting factors, but if everyone was working in such a company and they were as successful as they are now, productivity would skyrocket.