One of the interesting things to contemplate is the scale of the internal combustion engine. It’s a very human scale device; pistons the size of fists, Valves about as wide as knuckles. It’s the kind of thing a man with normal sized machine tools can make. Most internal combustion engines in the world are on this human scale. The ideas came about from the very human business of making cannons and pumps for coal mines, so no real surprise at this. There are also fairly large ones driving cargo ships with pistons which are about a yard in diameter. Those are about as big as they get: half meter to a meter in diameter pistons and something around that size has been in existence for about a century (along with similarly sized steam engines they evolved from). Cars with fist sized pistons have a thermodynamic efficiency of around 25%, maybe 35% on a good day. The thing with manhole size pistons hits 50% and is able to burn tar-like bunker fuel.
The more important prime mover is the turbine. For gas turbines, the turbine blade is of a similarly human length scale: the things that convert heat into motion are single crystals of nickel-superalloys which are a few inches long; about 6 inches long -not real different in scale from car or marine engine pistons. Steam turbine blades are made of less exotic materials and are considerably longer; maybe a few feet long -just like the old timey big piston steam engines. If we ever switch to supercritical CO2 turbines, the blades will be much smaller -back to gas turbine size or smaller.
There are lots of reasons for this, but the primary reason is people are people sized and tend to make things out of parts on people scales. If you start thinking about other length scales, things get very different. For the same reasons you can’t just make a lathe very small and expect it to function similarly, you can’t make an efficient heat engine very small and expect it to work the same way. For example, the surface area to volume ratio in smaller engines becomes unfavorable for standard designs. Combustion looks different on millimeter length scales than it does in fist sized objects; it’s much more unstable, and the droplet size from something like a fuel injector or carburetor isn’t so favorable to very small motors. To put a scale on it; diesel motor injectors make droplets around 5 microns. Gasoline/alcohol, maybe 25 microns. If you’re using a carburetor, which on a small engine you probably are for “it’s difficult to fit a fuel injector in here” reasons, probably 100 or 200 micron droplet sizes. Imagine you have a 5mm (aka 5000 microns) bore engine, the droplets start to look like giant beach balls bouncing around inside the piston. That’s going to produce very strange burn dynamics compared to the same droplets bouncing around. Average motors having a bore size of 90mm, it doesn’t look so bad. Going smaller than 0.1cc obviously this gets worse. Same story but worse for stuff like steam piston engines, along with the additional hurdle of having a tiny steam bomb in your prime mover.
There’s obvious reasons why a small heat engine might be desirable. Hydrocarbons are a great way of storing energy. Much better than the present generation of battery technologies in terms of weight and volume. That’s why life uses hydrocarbons to store energy. Having a little motor and some ethanol for a laptop battery sounds pretty cool to me. I mean, a fuel cell would be more silent and futuristic, but nobody can make those work right, and people do make motors work on a regular basis and have for 150 years or more. Again, 1200kJ/kg lithium batteries versus 40,000kJ/kg kerosene. Imagine you’d like an insect sized drone (people definitely want this); you ain’t gonna power such a thing for very long with a tiny volume of lithium polymer, but you could certainly do it with some hydrocarbons.
Of course model engineers have made small heat engines for over a century now, but as far as I know, none of them have concentrated on making them efficient small heat engines; just making them function is enough work, or push a model airplane around.
Starting with the Carnot model, we can begin to see even more reasons why there might be challenges with building small, efficient heat engines:
Squeezing big heat differences into a small space is going to be more difficult than squeezing big heat differences into a large space. An efficient heat engine burning kerosene or whatever might have 
Making flame on a small length scale is also inherently difficult, there is a phenomenon called “flame quenching distance.” Over a length scale of a few millimeters the flame can’t propagate well. I believe this is independent of the beach-ball sized fuel droplets in tiny motors, but it’s probably somewhat related.
Speaking of scale: stuff like piston rings assumes a piston-cylinder gap which involves a piston of a couple of inches drilled by conventional boring bars. These have gaps of a certain size, which work very well at this point for pistons of this size. They work like shit on much smaller pistons/bores because, like, geometry. A tiny gap in a 95mm piston looks huge in a 5mm piston in comparison to total area.
Surface area to volume: this is why we don’t have very large insects (but did when there was more oxygen in the atmosphere). Bugs breathe through holes in their skin rather than through lungs. Works fine for small critters, falls over for anything bigger than current year bugs. Similarly the surface to volume ratio is very different for a 1cc (model airplane) or 0.1cc or 0.01cc engine than from a more ordinary 2000cc or 4000cc motor pushing your car around (7000 cc for Americans I guess). There are many implications related to this: heat transmission is one of them. It’s easy to maintain large temperature differentials in a bigger motor. Large temperature differentials means higher efficiency. At smaller length scales, the thermal conductances scale differently from the forces as well, so something like a steam engine is going to look radically different at 0.1cc than 50,000 cc like in a big old timey ship steam engine piston.
The other thing is a little motor is necessarily going to have to run at a higher RPM for high energy densities, and that’s kind of bad for combustion efficiency because the flame has to propagate and the high RPMs make it more difficult for it to do so.
There are wackier ideas. Something like thermoacoustic engines was a pretty interesting foray into strange domains. In effect, this is a Stirling engine where the pistons are standing sound waves in a resonant chamber. These are using different kinds of physics to get rid of moving parts. They are pretty good sized -something like a foot long. There’s some crazy German dude on youtube building such things in hopes of powering his house using the effect, burning self-generated biogas. It’s not so much this design, as being inspired by it: using new kinds of physics to make small prime movers.
Keeping with the idea of using sound, there’s an idea called the thermoacoustic ratchet. You can create microcavities which create standing waves at very high frequencies when there is a temperature differential, from there you can harvest the energy using some other idea; maybe piezoelectric. There’s other material properties; people have started using pyroelectric materials to harvest such energy. Even weirder: using little vapor bubbles in liquid capillaries. Other ideas: evaporation has been looked at. Squeezing liquid through weird little pores. There’s probably a lot of crazy ideas in tribology and materials science that could be put to work here. One of the cool things about all this is much of it is open to tinkerers.
Small steam engine:
https://www.mpg.de/4691201/thermodynamics_microscopic_steam_engine
https://www.sciencedaily.com/releases/2011/12/111211134002.htm