No it does not. This sentiment, which many people have, is based on a fictional and idealistic notion of what small communities are like having never lived in such communities.

Empirically, even in high-trust small villages and hamlets where everyone knows everyone, the same incentives exist and the same outcomes happen. Every single time. I lived in several and I can't think of a counter-example. People are highly adaptive to these situations and their basic nature doesn't change because of them.

Humans are humans everywhere and at every scale.