I use smart pots as they air prune the roots as they grow out of the pot. There is no good reason to have roots bound. It doesn't help anything if that is what you are thinking.
Yes, you are correct more room is better for the plant to transplant then keep them crowded.
You will find, if you have a plant in a plastic 12oz cup and it is growing really well, that if you then transplant it to a 3-5gallon pot of medium, it will quit growing and just sit there for a period of time that could be as much as a couple weeks. The reason is that the plant has paused its veg growth so that it can grow the root mass. Once the root mass has reached a stopping point, then the veg will take off again. So it doesn't matter a whole lot about "root bind" in smaller pots versus "root freedom" in huge pots.
It is a factor that very much affects the plants, but you can grow a nice plant in a 2ltr bottle and watch it get seriously root bound, and if you feed and water it properly, it will still grow and produce quite nicely. I once grew a plant in a 16oz plastic dinner glass as a part of a contest and that one plant produced 1oz of dry bud.