Keeping Entrepreneurial Spirit as Your Business Grows

Why do growing businesses lose their entrepreneurial spirit?

In the early years, a small circle decides quickly. A customer asks for a special solution, and the next day a proposal is on the table. Ten years and thirty employees later, the same request needs a calculation, an approval, and a slot in the department meeting. The business has become more reliable. But it has also become slower, and some good ideas are no longer put forward at all.

Many owners experience this change as a creeping loss. They miss the agility of the early days without being able to say exactly when it disappeared. This article addresses one question: Can a business keep its entrepreneurial spirit as it grows, and if so, how?

To answer it, we first clarify what entrepreneurial spirit means and introduce the model of entrepreneurial orientation. Then come the research findings, two readings of the problem, and a tool for everyday use. The end gives an answer to the guiding question.

What is entrepreneurial spirit, and how can it be captured?

In everyday language, entrepreneurial spirit means an attitude: seeing opportunities, trying things, taking responsibility without waiting for instructions. For a sober analysis that is too vague. Research therefore uses the term entrepreneurial orientation. According to Rauch and colleagues (2009), it refers to the strategy-making processes that give an organization the basis for entrepreneurial decisions and actions.

Lumpkin and Dess (1996) described five characteristics through which this orientation shows. They are the thinking model of this article.

1. Autonomy

   Individuals and teams may push an idea forward on their own without asking permission for every step.

2. Innovativeness

   The business is willing to try new things: services, methods, ways of working.

3. Proactiveness

   The business acts with foresight and seizes opportunities before the market forces it to.

4. Risk-taking

   The business commits resources whose return is uncertain and consciously accepts possible losses.

5. Competitive aggressiveness

   The business actively confronts competitors instead of avoiding them.

The advantage of this breakdown is that it splits a vague term into parts that can be checked. A business can be strong in proactiveness and weak in autonomy. This very pattern is common in growing businesses: the owner still spots opportunities early, but employees are no longer allowed to seize them themselves.

A business rarely loses its entrepreneurial spirit all at once. It loses it one form at a time.

What does research show about entrepreneurial orientation?

Rauch, Wiklund, Lumpkin, and Frese (2009) summarized the research on the link between entrepreneurial orientation and business performance in a meta-analysis. They analyzed 53 samples from 51 studies with a total of 14,259 companies. The correlation was r = 0.242. The authors call it moderately large and note that it is robust across different measures and cultural contexts.

The authors themselves stress a limitation that matters for owners. Entrepreneurial decisions tie up scarce resources and carry the risk of losses. A blanket recommendation to act as entrepreneurially as possible would only be justified if the effect were clearly positive. It is positive, but not large enough to justify every venture.

More recent studies confirm the direction. Hernández-Perlines, Millán-Atenciano, and Ribeiro-Navarrete (2026) surveyed 156 Spanish family businesses and interviewed eight chief executives. Entrepreneurial orientation, measured through innovation, proactiveness, and risk-taking, strengthened performance, especially in the context of technological and digital change.

For the question of growth, a study by Purc, Laguna, and Moriano (2025) is revealing. They examined 82 owners of small businesses and 685 of their employees in three European countries. Owners who valued openness to change gave their employees more autonomy at work, and that autonomy was linked to innovative behavior by employees. Owners who placed more weight on preservation and security gave less autonomy.

The limits of these findings are clear. Most studies are surveys at a single point in time. They show relationships, not reliable causes. And they often measure entrepreneurial orientation through management's self-assessment. Whether a business considers itself entrepreneurial is not the same as whether its employees are allowed to act entrepreneurially.

First reading: growth forces bureaucracy

The first reading considers the loss inevitable. Whoever grows needs rules. A business with five people coordinates by calling across the room. A business with forty people needs responsibilities, approvals, and procedures, or errors and duplicated work follow. That agility is lost along the way is the price of reliability.

This reading can draw on Larry Greiner (1972), whose phase model is described in detail in the article The Owner's Role in a Growing Business. Greiner describes phases of calm growth that each end in a management crisis. The phase of coordination, with planning, metrics, and shared rules, is followed by the red-tape crisis: the rules slow things down. According to Greiner, this is not a mishap but the consequence of a solution that was right in the previous phase.

Anyone who follows this reading will not fight the loss of agility but limit it. They create protected islands for new things, such as a small team for pilot projects, and accept that the core business runs on fixed rules. How a business protects its core while something new grows is described in the article Protecting the Core Business While New Things Grow.

Second reading: not size but the kind of rules decides

The second reading does not dispute the need for rules, but it does dispute that the loss is inevitable. It points out that the five characteristics of entrepreneurial orientation respond differently to structure. Proactiveness and competitive aggressiveness depend mainly on leadership. Autonomy and innovativeness depend on how much room the rules leave.

The finding of Purc and colleagues (2025) supports this reading. In their data, employees' autonomy depended on the owner's values, not on the size of the business alone. The consultants Chris Zook and James Allen (2016) described a similar observation from their work with growing companies. They speak of the founder's mentality, which they see as including a sense of mission, closeness to customers at the front line, and thinking like an owner. In their account, this attitude is not lost inevitably with growth, but because complexity and distance from the front line increase. This is not established in the sense of a study. It is an assessment based on consulting cases.

I consider the second reading the more useful one, without disputing the first. Greiner is right that a growing business needs rules. But the red-tape crisis does not come from rules as such, but from rules that nobody questions anymore. If you design rules so that they leave room to act and review them regularly, you can gain reliability without giving up your people's autonomy entirely. How employees learn to think entrepreneurially themselves is shown in the article Fostering Entrepreneurial Thinking in the Team.

The Room-to-Act Test: four questions for every new rule

A simple tool follows from this assessment. The Room-to-Act Test asks every new rule four questions before it is introduced. It does not prevent rules. It ensures that they restrict autonomy and innovativeness no more than necessary.

• What problem does the rule solve? Name the error or risk it is meant to prevent. If there is none, the rule is not needed.
• Where does it end? Set the limit up to which employees may decide without asking, for example goodwill gestures up to 500 euros or special requests up to half a day of extra work.
• Who may deviate? Determine who may deviate from the rule in a justified individual case, and that the deviation is briefly recorded.
• When do we review it? Give every rule a review date, for instance after twelve months. Rules without a review date stay, even when their reason has long disappeared.

The tool complements two others described on this site. The outcome handover from the article From Founder to Business Owner clarifies what an employee is supposed to achieve. The Room-to-Act Test clarifies how much freedom they have on the way there.

What follows beyond the individual business

The idea reaches beyond the question of approvals. A growing business changes not only its size but also the way it learns. At first it learns through the owner, who knows every customer. Later it learns through its employees, who are closer to customers than the owner. Taking away their room to act cuts off the very channel through which new opportunities come in. How experienced entrepreneurs seize opportunities with the means at hand is described in the article Effectuation.

When rules typically multiply also depends on the size of the business. The article Growth Thresholds describes why businesses function differently at certain headcounts. If you know such a threshold is coming, you can introduce the new rules with the Room-to-Act Test from the start, instead of laboriously dismantling them later.

The limits of the argument should not be concealed. More room to act also means more mistakes, and not every business can afford them. In areas with high safety or liability risks, tight rules are right. Entrepreneurial spirit is not a value in itself. It pays off where customers and markets reward agility.

What you can do this week

1. Write down the ten rules that most often slow your employees down in daily work, such as approvals, forms, or coordination meetings.
2. Put each through the Room-to-Act Test and note which question it fails.
3. Change two rules immediately: set a limit below which decisions are made without asking.
4. Give all remaining rules a review date.
5. Ask two employees which idea they did not propose last year because the process seemed too cumbersome.

Conclusion: can entrepreneurial spirit be preserved?

The question was
a business can keep its entrepreneurial spirit as it grows, and how. The answer is a qualified yes. Research shows a moderately large, stable relationship between entrepreneurial orientation and performance. It also shows that employees' room to act depends heavily on the owner's attitude.

Growth forces rules, but not every rule forces a loss of agility. What matters is whether rules have a limit, allow exceptions, and carry an expiry date. A business does not keep its entrepreneurial spirit by doing without structure, but by building its structure so that it provides room to act.