Large groups make cooperation harder to establish and defend. [causal]
There is also an effect of group size. For larger groups, it is more difficult to establish cooperation, because the fraction of individuals that obtain information about any particular interaction will be smaller. Therefore, more interactions are required (relative to group size) in order to discriminate against defectors.
Nowak, M. A., & Sigmund, K, Evolution of Indirect Recip…, loc. 72