Business Plans in New Ventures : An Institutional Perspective

University dissertation from Jönköping : Jönköping International Business School

Author: Tomas Karlsson; Högskolan I Jönköping.; [2005]

Keywords: ;

Abstract: This thesis is about business plans in new ventures. It takes an institutional perspective with a particular focus on how external actors influence ventures through norms, regulations and way of thinking.Through an intensive study of six new ventures at a business incubator, and a structured, computer-aided analysis, this study probes the following questions: How are new ventures influenced to write business plans, and what sources influence them? What strategies do new ventures use to deal with those influences? What are the consequences of the chosen strategies?The findings show that entrepreneurs hold strong pre-understandings generated through books and their educational backgrounds. This influences their decisions to write business plans. This pre-understanding may be stronger than the actual external pressure to write the plan. This is indicated by two observations.First, the studied entrepreneurs write business plans before meeting with external constituents. The external constituents attach some importance to written business plans, but they do not consider plans crucial. Second, new venture managers loose couple the plan from their actual operations. Even the ones with the best intentions to consistently update the plan do not do it. They indicate that their business model develops too quickly and that they want to focus on doing business instead of writing about it.We may think that inconsistency between the plan and actual operations may aggravate stakeholders. However, entrepreneurs do not show their business plan to many external actors. Moreover, the external actors in this study rarely demand having a look at a business plan. Neither do they check to see if it is an updated one. The internal consistency of new ventures may be difficult and costly to investigate, and loose coupling could be conducted without loss of legitimacy. It is performance of the venture rather than formal appropriateness that drives legitimacy.Theoretically, this study develops a framework for understanding why new ventures write business plans (despite their questionable effects on efficiency and legitimacy). Companies are influenced by the ease and norms about business plans. In this way, their bounded choice to adopt the business plan institution becomes rational. The symbolic adoption of a business plan also generates a mimetic pressure for adoption, since mimicry often does not hinge on in-depth investigation of the mimicked organization.

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