Large companies can definitely coexist with small states, though. For instance, medieval Italy was largely dominated by small, independent city-states (Germany was rather similar), but it also saw the emergence of large banking companies (though these were not actual corporations) such as the Lombards, Bardi and Perruzzi. Those companies were definitely powerful enough to finance actual governments, e.g. in England, and yet the small city states endured for many centuries; they finally declined as a result of aggression from large foreign monarchies.