Edit: This question attracted way more interest than I hoped for! I will need some time to go through the comments in the next days, thanks for your efforts everyone. One thing I could grasp from the answers already - it seems to be complicated. There is no one fits all answer.
Under capitalism, it seems companies always need to grow bigger. Why can’t they just say, okay, we have 100 employees and produce a nice product for a specific market and that’s fine?
Or is this only a US megacorp thing where they need to grow to satisfy their shareholders?
Let’s ignore that most of the times the small companies get bought by the large ones.
If you have a company in a small town and everything is paid for and the size of the town isnt growing or changing, you actually do not need to grow. There is a company in Leadville, Colorado called “Melanzana”. They make technical hoodies - they’re pretty good. They actively shrank their business by closing their online storefront to reduce demand and reduce the burden of keeping up with that demand.
HOWEVER, if you have a business that is plugged into a larger marketplace and you have investors or have growing rents, etc. your investors expect a return on their investment and your growing costs need to be addressed so the only option is to grow to keep up.
Super interesting topic when you contextualize within a closed, limited, physical space. And by “super interesting” I mean dystopian.