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i believe it calculates it on amount of land "favored". probably not % based because else it would be harder to increase favor gen on bigger maps.
Your TCs have an "aura" (favored land). Building, when they are connected to the holy land of a TC, emit that "aura", too. The more area you cover with your favored land the faster you generate Favor.
Favored land begins from your Town Center and it needs to be spread from there. Some of the campaing missions are a good example of what I'm saying, to teach the player about favored land they give you bases with spread out buildings that have gaps you need to fill so that they benefit from Favored Land. For example, isolated collection points that need a house or two built between them and the base.
If you spread out too much you will cover more terrain globally but on the small scale you're going to leave a lot of gaps in your own territory, the last campaign missions show you this, they are pretty big bases covering a considerable amount of terrain, but in regards to "Favored Land" they are filled with gaps, some of them relatively big. So a more effective strategy would be to first secure untapped Favored Land in your own territory rather than expanding outright and risking overrextending territorially.
On the other hand, if you don't expand enough or aren't building efficiently with Favored Land in mind by building everything almost on top of each other you will be missing out on favor that you could easily get otherwise.
So to answer your question, whatever kind of base you prefer to build you need to be an efficient city planner, and as long as you are functional a close knit base might be more effective or even preferable.
I think the fact that the Chinese "barracks" can build a defense tower plays on this, not just as expansion outposts but also as defenses for more close-knit style bases since those and normal towers could potentially cover the entire base.
Remember that what's important is the AMOUNT of terrain you cover, NOT how LONG or WIDE is the terrain you cover. I'd say a base with almost no empty Favored Land space is favorable to a bunch of very spread out buildings with many gaps in them.