These were interesting comments. One that particularly struck me is that a small country may lack enough human capital to man key offices in government, universities, the professions, and businesses optimally. Suppose that there is a threshold number required to manage even a small government, university, etc. and that the percentage of people qualified for these managerial positions is very small. That is not a problem for a large country but can be one for a small one. It might follow that outstanding institutions would be found only in large countries. One answer is that small countries can frequently free ride on the institutions of the large countries--even in government, by joining a federation or confederation.
A question was raised concerning my statement that Pakistan had split in two--the questioner thought I might have meant India. British India indeed split, in fact into four pieces--India, Pakistan, Burma, and Ceylon (Sri Lanka). I was (as another comment notes) referring to the fact that Bangladesh used to be East Pakistan but became independent after a war between India and Pakistan.