In a damp climate and natural surroundings you would not want to have the wet hem of a kilt dragging in the vegetation and getting caught in the back of your knee when climbing a slope or stepping over some obstacle.

Most basic male clothing tends to be knee length - trousers are a relatively recent concept. Even when there were two tubes joined together and some fairly sophisticated tailoring, they tended to finish at or about the knee.

An alternative derevation of the small kilt might be that it is imitating a doublet without the sleeves and yoke. The lower portion of a doublet was gathered or pleated or smocked onto the yoke. The length of the yoke varies, from just under the arms to halfway to the waist from what I can see in my books on costume.

In some drawings and paintings it can be difficult to tell a doublet from a kilt as the yoke might be a different colour from the skirts and sleeves, with perhaps cuffs and a hem to match, or the skirt could be made of strips of yoke and sleeve material alternating.