In 1989, Bill Gates gave a talk to Computer Science Club of the University of Waterloo. It's recently been made downloadble. An at-times-fascinating listen, he makes this interesting -- yet ironic -- point.
Small teams are good. Organizing software development in small teams keeps your business focussed, efficient, and nimble. In my experience, Bill is right on. All the best and most productive dev teams I've worked on (and with) were between two and four people.
What a shame Microsoft today doesn't practice what Bill preached 18 years ago.