I don't think an evolutionary model is at work here, because if you take a broad enough view there isn't really any strong tendency one way or the other. Different regions circle in and out of various different models of political organization, and it is very easy of assuming one of them is the "natural" version and the others are just outliers or products of unusual circumstances. And of course there are also cases that don't fit any real progression--Egypt and Britain, for example, were never really city states, Switzerland in many ways still is, and Myanmar/Burma has been cycling through different forms of organization for mellennia.

That being said, strong city states tend to form in particular circumstances, often where they can capitalize on their comparatively greater organization than a territorial state--generally, with trade. However, when it comes down to it they are only very rarely able to compete against the sheer demographic pressures of a territorial state.

The main problem of a city state is a restricted population. This means that you have a limited number of citizens you can call on for war. Prior to the 16th century this wasn't too bad, since armies were small enough that the city states could wage war as well as anyone. From the 16th century onwards however armies steadily increased in number, and became more and more expensive. As the 16th century progressed even large polities like France and Spain struggled to find enough men to fill their ranks. Mercenary forces were the obvious answer but there were limited numbers of these and their loyalty to the state was of course questionable. As the big players started increasing the size of their armies beyond the 30,000 mark, the city states of Europe really started to struggle to keep up.

Secondly, diversity of income is important. A city state may be excellent at one thing, such as sea trade, maybe domnating a particular trading route or monopoly. But a larger kingdom may have many cities, each with a diverse revenue stream. If one revenue stream fails then its not a total disaster, the others can keep the state economically functional. When the meditteranean trade routes with the Middle East were circumvented by the Portugues and Spanish, and later Dutch and British trade routes that bypassed the Italian and Muslim routes by going around the Cape of Good Hope and Magellan Straits, this severely damaged the revenue streams of the Italian city states, and they had little other income ability to fall back on.