This is from what I've noticed from beginning the game and becoming gov in a few small alliances. May or may not be coherent. I've been awake for almost 20 hours now after getting like 6 hours of sleep.
1. Why not? It's entertaining for the larger alliance and benefits them through war experience, loot, etc.
2. Usually coordination. When a large alliance initiates hostilities (usually due to the reasons above or one of the alliances being annoying), the smaller alliances have to react almost immediately, coordinate meaningful attacks, and all participate. Even if all of those go well, they still may not be a match from the large alliance (or alliances). Usually, the "union" of micro alliances fail in most, if not all of those points.
i. Having a leader or high gov member from most/all alliances who is able (both politically and intelligently) to coordinate counterattacks online at the time of being attacked is necessary, but almost never happens. Large alliances, on the other hand, have more members in high government positions, so the probability of one or more of them being online and able to coordinate attacks is larger. A member of a smaller alliance may not listen to the leader of an allied alliance, which is a problem larger alliances don't have. In addition, a government member of an alliance would prioritize their alliance over other alliances and possibly cause conflict of interest. In addition, you need to have active members to counterattack, which many micros are unable to have. They need to be engaged in the community to be active. KT, for example, at the time of writing this (9PM Eastern) has 9 government members (all of whom I personally know are capable of staging a counterattack), in addition to at least 28 members (not including those who are set to invisible on Discord) online and able to counter an attack, with 45 offline.
ii. The leaders of micros tend to be relatively newer players who don't understand the mechanics well, so they are unable to train their members what to do if attacked or tell their members how to counterattack in a meaningful way. Compare that to a larger alliance. KT, for example, mandates members complete competency quizzes and build their nation with fighting in mind before they receive certain government funding. Back in Empire of Spades, we had spreadsheets of our enemies, including their score, military, etc. in order to easily see who we can target, who to assign to the target, and monitor war progression. I'd assume most, if not all large alliances have that capability. Some micros probably also have that capability, but the probability of a member having the skills to do that is small. Having one of those members in every alliance in the union is even smaller. Finally, most micros don't enforce any warchest requirements, so they are unable to fight for prolonged periods of time. Even if one or two micros in a union enforce one, they will be let down by their allies who roll over after one or two rounds of fighting. This all adds up to the members in general being poorer fighters, mostly due to government failures.
iii. I can't remember any time where this happened, but alliances may ditch their obligations to fight. I'm including this in the list since many micros tend to have leaders with no FA experience, causing them to sacrifice their long-term reputation in an attempt to save their growth. They find ways to not honor the treaty or provide little assistance, hoping for the opponent to spare them. (One way to not honor the treaty would be using the enemy's casus belli. If the CB is from one alliance being stupid, usually in the form of stupid posts on the forums, then they can try to wiggle their way into not honoring the treaty.) The entire basis of TEst's paperlessness was (and probably still is) building relationships and creating informal, secret treaties. You can read more about that on Prefonatine's blog. Now, if a union of small alliances were to do this, they would (in theory) be able to stick together. However, that takes time and would probably never happen.
3. If the union were to address the above points and not provoke conflict, they may have a chance. However, coordinating all of the above without infringing on each alliances' rights would be difficult and could even strain the relations, risking alliances bailing in a crisis.