Misalignment (not quite the same as distortion) of incentives is a big factor. In a small company, if somebody is doing something that doesn't contribute positi

Misalignment (not quite the same as distortion) of incentives is a big factor. In a small company, if somebody is doing something that doesn't contribute positively to the end result, it's super easy to notice. In a larger company, people or even whole large-ish organizations can be doing this and it's harder to notice because there's so many people legitimately moving in so many different directions. This can happen even when everybody involved has the very best of intentions. All of those fish swimming the wrong way do have a negative effect on efficiency, though.