Not a codec expert, but I can see two reasons. The first is that some fields in the encoding are not big enough, for instance a 12-bit field for the resolution

Not a codec expert, but I can see two reasons. The first is that some fields in the encoding are not big enough, for instance a 12-bit field for the resolution in some header can represent only up to 4095 pixels (or 4096 if "zero pixels" is not allowed). The second is that all video codecs I know of subdivide the image into small blocks and compress each block individually (mostly; there's some prediction from nearby blocks, and some mixing of the blocks at the end to smooth the edges between them), and older codecs only have blocks which are too small for higher resolutions (imagine for instance a 8x8 block in a 320x240 video, and then in the same video at 1280x960; the block clearly covers much less of the later video, so there's less variation for it to work with. Increase the resolution too much, and small blocks would start acting more like individual pixels, and you'd lose nearly all the compression.)