You're using your own experience of the games you've played to base your judgment on. The games I ran with 12 players were marathon games of 6-12 hours, so everyone got the spotlight and they were equally engaged. The breaking down into squads was to make running combat manageable.
Over the years I've run for many larger groups, the largest being 20 people playing CP2020 for 8 hours. Man, I can't do that anymore. Upon reflection I think I did an adequate job, but I'd like to think that over the past 20 years my skills have markedly improved and now I find my sweet spot is 3-4 players to provide the kind of gaming experience I want to provide.