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This study analyses the relationship between the drawing up of plans for start-ups (under five years of age) and certain performance factors, such as survival, growth and acquiring capital. The empirical approach uses a secondary database composed of data from 1,819 Brazilian start-ups. The data was processed by multivariate analysis using three groups of variables: performance as a dependent variable, planning as an independent variable, and other demographic data as control variables. The results indicate that planning does influence the survival and growth of enterprises, particularly in terms of collecting information, time taken to plan and the entrepreneur's perception of the importance of planning. The study showed that planning has no influence on the ability to raise financial resources.
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Int. J. Entrepreneurship and Small Business, Vol. 18, No. 3, 2013 349
Copyright © 2013 Inderscience Enterprises Ltd.
To plan or not to plan? An analysis of the impact of
planning on the disbanding or growth of Brazilian
Cândido Borges*
Faculdade de Administração,
Ciências Contábeis e Ciências Econômicas,
Universidade Federal de Goiás (FACE/UFG), Campus Samambaia,
Caixa Postal 131, CEP 74.001-970,
Goiânia, Goiás, Brazil
*Corresponding author
Marcos Hashimoto
Faculdade Campo Limpo Paulista (FACCAMP),
Al. Santa Monica, 60, CEP 13.301-871,
Itu, São Paulo, Brazil
Ricardo Limongi
Faculdade de Administração,
Ciências Contábeis e Ciências Econômicas,
Universidade Federal de Goiás (FACE/UFG), Campus Samambaia,
Caixa Postal 131, CEP 74.001-970,
Goiânia, Goiás, Brazil
Abstract: This study analyses the relationship between the drawing up of plans
for start-ups (under five years of age) and certain performance factors, such as
survival, growth and acquiring capital. The empirical approach uses a
secondary database composed of data from 1,819 Brazilian start-ups. The data
was processed by multivariate analysis using three groups of variables:
performance as a dependent variable, planning as an independent variable, and
other demographic data as control variables. The results indicate that planning
does influence the survival and growth of enterprises, particularly in terms of
collecting information, time taken to plan and the entrepreneur’s perception of
the importance of planning. The study showed that planning has no influence
on the ability to raise financial resources.
Keywords: planning; business plan; entrepreneurship; start-ups; disbanding;
growth; survival; small business; Brazil.
Reference to this paper should be made as follows: Borges, C., Hashimoto, M.
and Limongi, R. (2013) ‘To plan or not to plan? An analysis of the impact
of planning on the disbanding or growth of Brazilian start-ups’, Int. J.
Entrepreneurship and Small Business, Vol. 18, No. 3, pp.349–367.
350 C. Borges et al.
Biographical notes: Cândido Borges is an Adjoint Professor of
Entrepreneurship at the Federal University of Goiás Business School
(FACE/UFG), Brazil. His research interests and publications concern new
venture creation, entrepreneurship policy, technological spin-offs and social
capital. He is a member of the board of the Anegepe (Brazilian National
Association of Entrepreneurship and Small Business Studies). He received his
PhD in Management from HEC Montréal, Canada.
Marcos Hashimoto is a full time Professor and Researcher at Faculdade Campo
Limpo Paulista in Sao Paulo, Brazil. His research interests and publications are
in the areas of entrepreneurial orientation, intrapreneurship and corporate
entrepreneurship. He is a member of the board of Anegepe (Brazilian National
Association of Entrepreneurship and Small Business Studies). He received his
PhD in Business Administration from EAESP/FGV in Brazil.
Ricardo Limongi is an Assistant Professor of Marketing at the Federal
University of Goiás Business School (FACE/UFG), Brazil. His current research
interests are in the areas of entrepreneurial marketing and marketing in
the small firms. He received his Master of Business Administration from
1 Introduction
The writing of a business plan is probably the most widely taught theme in
entrepreneurial education (Baker et al., 2001; Honig and Karlsson, 2001). Outside the
university, the business plan sector has also become an attractive market for consultants
and publishers. In Spors (2007), a search for a ‘business plan’ found more than
19,000 titles on the Amazon online bookstore alone. By 2011, that number had risen to
Because of the importance attributed to the business plan in entrepreneurial
education, it could be assumed that there is consensus in the academic world that
planning or, more specifically, writing a business plan is something beneficial for
entrepreneurs. In fact, there is no such consensus. The results of studies evaluating the
impact of planning on the performance of nascent enterprises have been inconclusive
and contradictory. Some studies have concluded that the impact is positive (Brinckmann
et al., 2010; Delmar and Shane, 2003; Shane and Delmar, 2004; Greatti, 2004;
Van Auken and Neeley, 2000), while others have shown that there is no relationship
between the writing of a business plan, or other forms of planning, and operating
performance (Karlsson and Honig, 2007; Lange et al., 2007).
Besides the problem of contradictory results, another limitation of the research
heretofore conducted is that it has mainly analysed data from more developed
economies, which has led authors such as Delmar and Shane (2003) and Brinckmann et
al. (2010) to point out the need for research on this issue in other countries and cultural
In order to contribute to the debate about the pertinence or otherwise of the
entrepreneur’s planning, this paper investigates the question: what is the impact of
planning on the survival and growth of startups? Statistical tests including the
multivariate regression technique were carried out in dataset established by Sebrae, São
To plan or not to plan? 351
Paulo, Brazil, with information on 1,819 new companies. The analysis looked at the
length of time the entrepreneur spent planning and gathering information before
launching the venture and the impact of these planning activities on the survival and size
of the company.
After this introduction, this paper goes on to present the theoretical framework used
to define and delimit the research. The third section describes the methodology used
while the fourth presents and analyses the survey results. Then the study concludes by
summarising the main aspects of the research and makes some recommendations for
entrepreneurs, support personnel and researchers in the field.
2 Planning and performance of the start-ups
The discussion about the importance of planning is not unique to the field of
entrepreneurship. It also holds sway in administration, in general, but more specifically in
the field of strategies. Two major schools have formed around this debate: the planning
school and the learning school, the former in favour of planning and the latter placing
more emphasis on the learning and adaptation which occur over time (Brinckmann et al.,
2.1 The planning school
The Planning School’s assumption is that the plan increases the chances of success of
human or operational action. Planning reduces uncertainty, facilitates decision making,
helps control subjectivity and personal bias and develops new forms of action (Andrews,
1971; Armstrong, 1982). According to this school, planning is crucial especially when
the scenario is uncertain and complex – and this is the context in which entrepreneurs
live. It helps entrepreneurs understand this complex context and identify the best ways to
deal with it (Shane and Delmar, 2004). It facilitates the integration of available resources
with the goals of the entrepreneur, and helps in identifying the skills, resources and
information which can lead to these goals and create a plan of action for doing so
(Delmar and Shane, 2003).
Planning can be structured in different ways:
1 done mentally
2 semi-structured, with a certain formalisation
3 laid out in detail in written form.
The planning school considers that the latter type is that which most contributes to
reaching targets (Shane and Delmar, 2004).
In entrepreneurship, this detailed written plan generally takes the form of a business
plan. Proponents of writing a business plan say that, besides being a form of planning, it
also serves as a tool for raising capital, communicating with stakeholders and reflecting
on the entrepreneurial career and the future business.
352 C. Borges et al.
2.2 The learning school
On the other hand, the learning school maintains a more adaptable and incremental focus
on operational action (Brinckmann et al., 2010). It says that when faced with uncertainty
it is not possible to identify a priori the best course of action, and that entrepreneurs
should set about launching a new venture without planning, and learn and adapt to
contingencies as they appear (Bhidé, 2000; Mintzberg, 1994).
For Bhidé (2000), entrepreneurs start up a company in an improvised way using few
resources, so as not to have much to lose should it fail. According to him, those who draw
up business plans do so more to meet the demands of financial institutions, government
agencies or tender for contracts than to use it as a planning or management tool. This
view is shared by Honig and Karlsson (2001, 2004), who in their research, found that
most entrepreneurs who make business plans, do so because they feel obliged to do so.
According to them, “new organisations plan because they are reacting to how they are
expected to plan, because they imitate other successful organisations in their fields that
plan, or because they are told to plan” (2004, p.43).
Critics of planning further claim that drawing up business plans takes up
time and resources which the entrepreneur could use for more important activities
such as product development, customer contact and product promotion (Bhidé, 2000;
Carter et al., 1996). Furthermore, they say that a plan gives the entrepreneur an
illusion of control over information and other market factors (Mintzberg, 1984) and also
that plans show discrepancies from reality and are quickly abandoned (Karlsson and
Honig, 2007).
2.3 Research into the impact of planning on the performance of start-ups
Results of research into the impact of planning on the performance of start-ups are
somewhat contradictory, with certain studies showing a positive impact and others not,
indicating that entrepreneurs do not get any concrete returns on the hours and resources
they invest in planning. Table 1 summarises some of these studies.
Table 1 Examples of studies which analysed the relationship between planning and the
performance of startups
Author Method Results
Brinckmann et al.
(2010) A meta-analysis
of 46 studies Positive impact. Planning enhances the
performance of new and small businesses.
Contextual factors, age of the company and
the cultural environment substantially impact
on the planning-performance relationship.
Delmar and Shane
(2003) and Shane
and Delmar (2004)
n = 223; start-ups,
Sweden, quantitative,
longitudinal (over the
company’s first
30 months of trading)
Positive impact. The business plan increases
the chances of survival of businesses and
facilitates the development of new products
and implementation of other activities in the
entrepreneurial process.
Greatti (2004) n = 195; micro and small
enterprises; quantitative;
planning activities before
and after the onset of the
company’s activities
Positive impact. Companies which spent
more time planning and had drawn up a
business plan have a greater survival rate.
To plan or not to plan? 353
Table 1 Examples of studies which analysed the relationship between planning and the
performance of startups (continued)
Author Method Results
Lange et al. (2007) n = 116; new companies;
quantitative No impact. If one only considers impact on
performance, there is no reason for drawing
up a business plan before launching a new
Karlsson and
Honig (2007) n = 6; start-ups, Sweden;
qualitative, longitudinal,
(over the company’s first
four years of trading)
No impact. After writing, the plan is rarely
consulted or updated.
Van Auken and
Neeley (2000) n = 131; small
businesses; USA;
Positive impact. Companies which undertake
planning activities, such as preparing a
business plan, financial plan and cash flow
projections, manage to organise a more
efficient capital structure and require less
financial resources to start a company.
Some authors even when not finding any significant results in the relationship between
planning and performance, have relativised some of their conclusions. Lange et al.
(2007), for example, suggest that if the entrepreneur does not need to raise a considerable
amount of capital, it would be better not to draw up a business plan and set about
launching the venture, as quickly as possible. However, they do suggest other more basic
planning activities, such as cash flow projections.
Some of the research presented in Table 1 is used as parameters in
constructing the variables used in this study. These variables, as well as other aspects
of the methodological procedures underlying this research are presented in the next
3 Method
3.1 Data
This research is of a quantitative nature and used a 2004 Sebrae, São Paulo, dataset on the
disbanding and survival of start-ups. This dataset consists of information collected on
1,961 companies launched between 1999 and 2003. The sample was obtained after
extensive consultation of data from Jucesp (the São Paulo registrar of companies) and
additional consultations of CNPJ (national register of legal entities) of the internal
revenue service, the register of employer establishments at the Ministry of a Labour and
Employment and registration data in the local telephone company in various economic
sectors and regions in the State of São Paulo.
Data was collected during personal visits to entrepreneurs in these establishments,
regardless of the situation of their enterprise at the moment of interview. Companies not
trading at the time of the research and whose entrepreneurs indicated that they did not
intend to resume activities in the future were considered inactive. A pre-structured
354 C. Borges et al.
questionnaire served as a basis for the interviews, which were always presence-based,
except when the interviewee indicated otherwise.
After an initial survey of registration data, the interviewer went on to collect
information about the business, using a total of 55 open and closed questions. The
questions sought to identify the profile of the entrepreneur and the business and also the
procedures used prior to and after setting up the business.
A total of 1,819 companies formed the sample for analysis. There is a difference
between the total number of companies in the dataset and the number retained for this
study due to an attempt at improving the quality of data in the selection of these
companies. Hence companies were excluded from the dataset:
1 when they were not formally established or did not present the company situation
(active or inactive)
2 when they did not present the size (number of people involved at the time of
interview or in its last month of trading)
3 when they did not answer all the questions used to establish the study’s dependent,
independent and control variables.
Out of the 1,819 companies analysed, 1,536 (84%) were active and 283 (16%) had
3.2 Variables
This study investigated the contribution of planning to the survival and growth of
startups, so three groups of variables were created:
1 dependent variables, with data on the performance of the nascent company
2 independent variables, with data on the planning practices of entrepreneurs
3 control variables, with data on other factors which could influence the performance
of a nascent company.
3.2.1 Dependent variable: performance
Performance is the dependent variable of this study. But how is the performance of a
nascent company measured? Among the literature’s most frequently mentioned indicators
are company survival (continuing to trade, not disbanded) and growth in the number of
its employees (Chandler and Hanks, 1993; Chrisman et al., 2005; Cooper, 1993; Watson,
2007, Wiklund and Shepherd, 2005). Both of these indicators are used in this analysis.
Besides these, this study uses another performance indicator, namely the structure of
start-up financing. Some authors indicate that a business plan helps in negotiating bank
loans (Delmar and Shane, 2003; Karlsson and Honig, 2007), so acquiring funds is one of
the performance indicators considered in this study. Table 2 shows these three
performance indicators, which are treated separately and not integrated into a single
performance variable.
To plan or not to plan? 355
Table 2 Description of the dependent variables
Variable Description
Company status Operating or temporarily inactive (1), disbanded with no provision for
resuming activities (2)
Company size Number of people involved (including partners and family members
working in the company).
Did it use its own resources, those of relatives or of friends?
Did it get bank loans?
Methods used to
acquire capital
For each of these issues, a negative response was given (0) and a positive
response (1).
Table 3 Description of independent variables
Variable Description
Time spent on
planning before
the company
started operating
Months spent by the entrepreneur acquiring information on the company,
planning the business or studying the industry before starting operations.
Entrepreneur’s acquisition or knowledge of the following information before
setting up the company:
Who would their suppliers be and how they worked in terms of price
and payment terms
How many competitors the company would have
How many customers the company would have and what their consumer
habits were
What qualification would future employees require
What legal aspects would the business involve
What the best location for the company would be
What investment would be needed and what costs the business would
acquired about
the business
before starting
to trade
For each of these items, a negative response was given (0) and a positive
response (1).
If the entrepreneur had the following company planning practices:
To always set goals and targets for projects
To always look for information to help in decision-making
To always plan and monitor each phase of projects and operations
For each of these items, a negative response was given (0) and a positive
response (1).
Recognition of
the importance
of planning
A binary response considering yes (1) and no (0) for the following question:
Believes that the most important factor for the survival of micro and small
enterprises is good planning before the onset of trading.
Of the 1,819 companies surveyed, 283 (16%) had disbanded and 1,536 (84%) were active
or just temporarily inactive. The average number of people involved in activities was 6,
while 97% of businesses had fewer than 20 people involved and only 36 companies (2%)
had obtained bank funding.
356 C. Borges et al.
3.2.2 Independent variable: planning
The independent variables looked at the process of business planning, both before and
after the launching of the venture. The collection of information was a specific focus
(Delmar and Shane, 2003) as were the time spent on planning before launching the
business (Greatti, 2004) and the planning practices used after the company had started
trading. With regard to the latter, the following practices were analysed: setting goals,
collecting information and anticipating events (Andrews, 1971; Armstrong, 1982). The
entrepreneur’s perception of the importance of planning was also looked at. Table 3
describes the independent variables.
Table 4 Description of control variables
Variable Description
Gender Male or female.
Age Information presented as the number of years.
Schooling Options: unfinished primary education, finished primary education,
finished high school, finished third level.
If up to three months before launching the business the entrepreneur had
been unemployed or not (yes or no).
occupation three
months prior to
launching the
For those who had been employed three months before, what their
profession was. Options (one answer only): a civil servant, private
enterprise employee, self-employed, owner of another company, farm
worker, student/trainee, housewife or retired.
If the entrepreneur had had professional experience in the company’s line
of business (yes or no).
For those who had had experience in the sector, what this experience was:
experience in the
company’s line of
business Options (one answer only): director/manager of another company in the
same line of business, employee of another company in the same line of
business, partner/owner of another company in the same line of business,
a family member had had a similar business, had been self-employed in
the same line of business.
Main reason for
launching the
business (1)
Options (one answer only): had wanted to own their own business, had
been unemployed and unsuccessful in getting employment, had identified
a business opportunity, had wanted to improve their lifestyle, requirement
of customers/suppliers.
Main reason for
launching the
business (2)
Opportunity or necessity
3.2.3 Control variables
The literature indicates that factors other than planning can influence the performance of
a newly established company. Such factors are mainly related to previous experience as
entrepreneurs in the line of business, the reasons for setting up the company and the
entrepreneur’s age (Borges et al., 2008; Davidsson and Honig, 2003; Mizumoto et al.,
2010; Shane et al., 2003; Shook et al., 2003). In order to control these factors,
To plan or not to plan? 357
the regression tests contained seven issues as control variables. These are shown in
Table 4.
Table 5 presents the frequency of companies operating or not operating for each of
the control variables. It can be seen that 707 companies (39%) had been set up by young
people aged 35 or under, 82% of entrepreneurs had completed high school or third level
education, 49% had had experience as being self-employed or as company owners, 37%
had had experience in the line of business as employees of other companies, 30% had had
a desire to own their own businesses and 69% said that the launching of the company was
due to their having identified an opportunity.
Table 5 Data from control variables, in accordance with the status of the company
Trading Disbanded
Control variables Frequency % Frequency %
Male 1,123 73% 187 66%
Female 413 27% 96 34%
Age: 25 or under 139 9% 22 8%
Age: between 26 and 35 469 30% 77 27%
Age: between 36 and 50 721 47% 139 49%
Age: 51 or over 207 14% 45 16%
Schooling: unfinished primary school 69 4% 32 11%
Schooling: finished primary school 178 12% 41 14%
Schooling: high school completed 653 43% 121 43%
Schooling: third level completed or beyond 636 41% 89 31%
Had no occupation before launching the business 323 24% 59 22%
Had been employed before launching the business 1,213 76% 224 78%
Previous occupation: civil servant 41 3% 10 4%
Previous occupation: private enterprise employee 503 41% 92 41%
Previous occupation: self-employed 306 25% 66 30%
Previous occupation: owner of another company 232 19% 27 12%
Previous occupation: farm worker 11 1% 0 0%
Previous occupation: student or trainee 44 4% 2 1%
Previous occupation: housewife 42 3% 14 6%
Previous occupation: retired 34 3% 14 6%
Had had experience in the same line of business 1,022 67% 178 63%
Had had no experience in the same line of business 514 33% 105 37%
Experience: director or manager of another
company in the same line of business 115 11% 15 9%
Experience: employee of another company in the
same line of business 466 46% 80 45%
358 C. Borges et al.
Table 5 Data from control variables, in accordance with the status of the company (continued)
Trading Disbanded
Control variables Frequency % Frequency %
Experience: partner/owner of another company in
the same line of business 142 14% 21 12%
Experience: a family member had had a similar
business 84 8% 27 15%
Experience: had been self-employed in the same
line of business 215 21% 35 20%
Reason for launching the business: had wanted to
own their own business 467 30% 86 30%
Reason for launching: had been unemployed and
unsuccessful in getting employment 18 1% 2 1%
Reason for launching: had identified a business
opportunity 663 43% 104 37%
Reason for launching: to improve living standards 156 10% 47 17%
Reason for launching: requirements of
customers/suppliers 182 12% 38 13%
Reason for launching: other 50 3% 6 2%
Reason for launching: opportunity 1,067 69% 186 66%
Reason for launching: need 469 31% 97 34%
3.3 Analysis procedures
In order to analyse the variables related to planning, it was decided to apply the
multivariate regression analysis technique to identify the best relations between the
questions posed in the study. According to Hair et al. (2005) multivariate regression
analysis helps to understand the relationship between the different independent variables
and the single dependent variable being studied. Fávero et al. (2009) complement the
discussion stating that the regression models are intended to verify the relationship
between a set of exploratory metric variables or dummies and a metric dependent
variable, or rather, it seeks to evaluate the impact of each explanatory variable, and how
effective the suggested model is according to equation (1):
11 2 2 3 3
...ybxbx bx a=+ + + (1)
y criterion variable
bn first variable
xn curve of the variable
a constant.
To plan or not to plan? 359
Table 6 Table of correlation of variables
Notes: **Correlation is significant at 0.01 level.
***Correlation is significant at 0.05 level.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
1 Time spent 1.00
2 Knowing suppliers 0.016 1.00
3 Knowing competitors –0.012 0.273** 1.00
4 Knowing customers –0.040 0.281** 0.303** 1.00
5 Knowing manpower –0.022 0.315** 0.317** 0.310** 1.00
6 Knowing legal aspects –0.023 0.244** 0.253** 0.201** 0.328** 1.00
7 Knowing location –0.027 0.178** 0.285** 0.171** 0.277** 0.215** 1.00
8 Knowing investment value –0.009 0.156** 0.254** 0.200** 0.265** 0.250** 0.238** 1.00
9 Always_objective_targets –0.082** 0.006 0.025 0.041 0.029 –0.003 0.007 0.066** 1.00
10 Always_opportunities –0.043 –0.002 0.034 0.046* 0.013 0.047* 0.074** 0.069** 0.248** 1.00
11 Always_search for information –0.055* 0.017 0.038 0.053* 0.042 0.052* 0.022 0.070** 0.250** 0.263** 1.00
12 Importance of planning –0.010 –0.030 –0.015 –0.001 –0.009 –0.010 –0.001 0.039 0.042 0.026 0.040 1.00
13 Company situation –0.050* –0.027 –0.006 –0.010 0038 0.030 –0.007 –0.028 0.054* 0.093** 0.120** 0.001 1.00
14 Company size 0.026 0.053* 0.017 –0.012 –0.042 –0.064** –0.008 –0.016 –0.043 –0.013 –0.036 –0.035 –0.011 1.00
15 Own resources –0.022 0.004 0.046* 0.014 0.047* 0.051* 0.011 0.104** 0.001 0.002 0.040 0.033 0.014 0.142** 1.00
16 Third party resources –0.026 0.007 –0.021 –0.028 –0.025 –0.004 –0.019 –0.022 –0.048 0.007 0.014 0.016 –0.011 –0.020 0.043 1.00
360 C. Borges et al.
Having decided to apply the multivariate regression technique, certain important steps
were taken in advance in accordance with the assumptions of the classical model
discussed by Kennedy (2003) and the recommendations proposed by Hair et al. (2005).
The tests performed in advance were: the least squares method which ensures the best
relationship between the different independent variables and the single dependent
variable. Then the F test was performed in order to compare the variance explained by the
regression and the necessary statistical significance (p < 0.05). Subsequently the
correlation coefficients between the variables to be analysed were examined. The result is
shown in Table 6.
The multivariate regression technique was applied using the SPSS 16.0 software. For
the regression analysis, certain tests were created in order to check the sample from the
point of view of the aim of the study, that is, identify the influence of planning on the
performance of startup companies. The aim of the first test was to analyse the
relationship between the proposed planning variables and the situation (disbanded or
trading) of the 1,819 companies analysed in the sample. The aim of the second test was to
identify the relationship between planning and company size. The final test set out to
examine the relationship between planning and means of acquiring funds used to launch
the venture.
4 Presentation and analysis of results
4.1 Results
The results based on the tests discussed in the previous section are presented in
Table 7.
Certain aspects of the final regression model must be highlighted. The planning
variables which entered the model as independent were applied to the model based on the
company performance variables which were part of the model as dependent, thus, after
the correlation analysis the model was preliminarily tested. From the first test of the
models it could be seen that certain variables behaved differently when tested jointly, so,
as the footnote in Table 6 shows, certain variables which presented no significance
(p < 0.05) were removed from the model with a view to getting a better result from the
regression equation.
Once these variables had been removed from the test, other planning variables
contributed to the model, and furthermore, had a satisfactory significance for the final
model. After the tests had been presented and discussed, what were considered control
variables, such as gender, age, schooling and others were tested in the regression model
in order to identify the influence of these variables in relation to the explanation of
planning and the performance of the company. Thus, the variables classified as control
variables in this study did not significantly influence the regression model, as confirmed
by the covariance test.
To analyse the impact of the control variables, it was decided to undertake a
covariance analysis based on the three steps proposed by Favero et al. (2009): descriptive
statistics to analyse the mean and standard deviation, followed by the size of the
effect in terms of magnitude between the global measures, and finally the ANCOVA
inferential test which proved the results with the control variables without any significant
To plan or not to plan? 361
Table 7 Estimates of the coefficients of the models and regressions
variable – situation of the
variable – size of the
variable – acquiring funds
from family
variable – acquiring funds
from banks
Independent variables
Coefficient Significance
Coefficient Significance Coefficient Significance
Coefficient Significance
Time spent planning 0.000 0.086* 0.000 0.447 0.000 0.401 0.000 0.198
Previously acquired
Knowing suppliers –0.028 0.159 0.026 0.002* –0.012 0.404 0.016 0.327
Knowing competitors –0.008 0.687 0.012 0.162* 0.013 0.360 –0.005 0.737
Knowing consumers –0.015 0.437 –0.004 0.634 –0.009 0.529 –0.014 0.343
Knowing manpower 0.044 0.029* –0.016 0.061* 0.011 .4280 –0.010 0.524
Knowing legal aspects 0.025 0.205 –0.023 0.004* 0.014 0.309 0.004 0.810
Knowing location –0.011 0.557 0.000 0.983 –0.012 0.348 –0.007 0.619
Knowing investment
level –0.039 0.053 0.001 0.940 0.055 0.000* –0.008 0.632
Planning practices
Always objective targets 0.014 0.597 –0.016 0.146 –0.011 0.558 –0.051 0.017*
Always opportunities 0.055 0.008* 0.002 0.795 –0.007 0.637 0.011 0.501
Always searching for
information 0.104 0.000* –0.010 0.361 0.027 0.141 0.021 0.322
Recognition of the
importance of planning
Importance of planning –0.004 0.844* –0.011 0.181 0.017 0.216 0.012 0.446
R² 0.038 0.012 0.010 0.002
Note: *Variables which made up the final regression model.
362 C. Borges et al.
4.2 Analysis and discussion
The results of the research show that certain elements of the planning process have a
positive impact on the performance of recently established companies.
4.2.1 Impact of planning on the company’s survival
The first test, which aimed to identify how planning variables influence the survival of a
company, that is, whether trading or disbanded, showed that time spent planning has a
positive impact on the company’s survival – the test resulted in a contribution of 4%.
There is a greater probability of survival of companies which spend more time planning.
Information collection also had a positive impact on the chances of survival of a
company. Surveying and the prior collection of two types of information were most
1 the need for qualification of the labour force before launching the venture
2 the collection of information for decision-making.
These two types of information searches proved directly proportional to the company
situation. In other words, knowing in advance what human resources would be needed for
the enterprise and collecting information for decision making contributed towards the
survival of the business.
Another variable which attained statistical significance for the model was the
recognition of the importance of good planning prior to launching. The results would
indicate that the probability of survival is greater for entrepreneurs who believe that the
most crucial factor for the survival of micro and small enterprises is good planning before
setting up the company.
4.2.2 Impact of planning on the size of the company
The second test carried out in relation to planning and company size showed that
planning contributed approximately 1.2% to size in terms of the number of employees in
the company, while highlighting only those variables which showed the importance of
collecting information in advance about the business.
Surveying and acquiring the following information in advance of the launching of the
venture were significant in this test: knowing suppliers and their terms of payment,
knowing the number of competitors, knowing the manpower qualifications required and
the legal aspects which the business involves.
Neither the time spent planning nor the entrepreneur’s perception of planning had any
significant impact on company size.
The results of this second test are similar to those of the previous test and show that
the collection of information has a major impact on company performance. In assessing
the impact of planning on the performance of start-ups, the most significant aspect was
that the surveying and collection of information before launching increases its chances of
success. An important fact for consideration here is that the question as formulated in the
questionnaire inquired about the ‘surveying and prior collection’ of specified
information. While information collection may be considered a part of planning, prior
acquisition of knowledge is not necessarily so. The entrepreneur may, for example, have
To plan or not to plan? 363
accumulated this information from previous experience, and not from a proactive search
for planning purposes. The results must thus be somewhat relativised.
4.2.3 Impact of planning on fundraising from institutional sources
The third test, which examined the impact of planning on fundraising from banks, did not
generate very significant results. These results would reinforce the questioning in the
literature as to whether a formal planning tool, in particular a business plan, is really
important for acquiring capital. Karlsson and Honig (2007) claim that most banks and
funding agencies use their own assessment tools and do not necessarily request a business
plan, as a plan is a more frequently used mechanism to acquire funding from venture
capital markets and angels. Further research would be needed to assess whether a
business plan is, in fact, a significant mechanism for raising funds even with these two
types of lenders.
5 Concluding remarks
This study set out to analyse the impacts that business planning practices have on the
survival and growth of recently established companies in the State of São Paulo. From
the results, certain conclusions can be inferred. The act of planning involves, above all,
the collection of information to help entrepreneurs anticipate risks and improve the
quality of their decision making with regard to the future of the business.
Overall, the results of this research confirm those of other studies which have
identified positive correlations between this managerial practice and the survival of
companies. The specific contribution that this paper proposes for these studies lies in the
confirmation of the perception of entrepreneurs who carry out this practice as opposed to
those who disbanded their business. Another contribution is the finding that how well this
practice is implemented is proportional to its chances of survival.
The lack of relationship between planning and the ability to raise funds, even if
contrary to similar studies conducted in other countries, can be justified by the current
immaturity of Brazil’s venture capital market, where the business plan is an essential tool
for stimulating the interest of those investors interested in buying shares in new ventures.
The Brazilian environment for acquiring funds is concentrated primarily in commercial
banks which grant credit facilities and funding for certain specific company operations,
such as expansion, acquisition of machinery, development of new products or short term
working capital. In most situations the target market for these financial institutions is
already established businesses with assets to be offered as collateral. Start-up companies,
the object of this research, are beyond the range of such institutions.
It is worth noting here that survival is different from success. The fact that a company
still continues to exist after a certain period of time does not necessarily mean that it is
successful, as success can be understood in terms of growth, either in size, sales, market
share or business complexity. For that reason, the analysis considered factors of survival
and growth in terms of size independently. That is even more relevant in the light of the
conclusions of a study by Mizumoto et al. (2010), which states that while minimal
planning is important for the survival of a recently established company, extensive
planning does not increase its chances of survival. What may be important for the
company’s growth may not necessarily be important for its survival, since in terms of
364 C. Borges et al.
survival action and reaction skills are more important than planning. Paralysis because of
analysis, which can be understood as the difficulty of interpreting the planning phase in
order to begin to operate and put the plan into practice, could be fatal for companies at
the early stages of their life cycle, because the environment is aggressive and the situation
of the company fragile.
The results would indicate that planning contributes to both the company’s survival
and growth, but what differentiates between these two situations is the type of
information most relevant for the entrepreneur to collect in these two phases. For the
survival entrepreneur, decision making and the qualification of manpower were the most
important elements, which can be justified by the fact that this type of entrepreneur is
usually dealing with scarce resources, and considering that the payment of employees is
one of the highest costs, they cannot afford to make wrong choices when hiring staff,
remembering that the vast majority of interviewees had less than 20 people on their staff.
If there is a relationship between the collection of information about manpower and the
decision-making process and the survival of start-ups, it can be inferred that disbanding
could be related to the difficulty in attracting talent which could help the entrepreneur
overcome the most critical phases of the beginning of their venture.
The type of information that the growth entrepreneur seeks is more related to aspects
which are not directly linked to survival factors. It was seen that, along with concern
about manpower, entrepreneurs who make their business expand are also concerned
about their suppliers, competitors, payment flows and legal aspects, all of which indicates
an expansion in the scope of their planning which leads to a reduction in uncertainty and
more focused, specific, reliable and objective decisions about the future of their business.
Companies which expand move closer to the level of maturity characterised by
stability of the business. This facilitates planning since information on the business which
is more structured, and on the environment, of which the entrepreneur has a better grasp,
is more easily collected, structured and analysed, even if not linked to formal planning
processes or is restricted to the tacit learning which the entrepreneur themselves have
acquired through their activities. This could explain why recently established ventures
which survive spend more time planning than those which disband. The lack of structured
information requires an additional effort on the part of the entrepreneur in terms of
collecting the necessary information for planning, but which can be compensated for by
an increase in the chances of survival of their enterprise.
The relationship between the entrepreneur and uncertainty is another factor deserving
consideration. It can be concluded that there is an ambiguous relationship between the
entrepreneur and their planning process and the uncertainty they face, especially due to
the lack of access to relevant information, typical of the early years of the business,
during which the entrepreneur is still learning about the industry, the market and the
operating dynamics of their business.
If, on the one hand, the high degree of uncertainty is reflected in a greater need for
planning in order to minimise the risks arising from a lack of information, on the other
hand, it is precisely this lack of information which makes the initial plans drawn up by
the entrepreneur at the outset of their business incomplete, flawed and based on what are
frequently unrealistic assumptions. In other words, the greater the uncertainty the greater
the need for planning, and the worse the quality of planning. Sarasvathy (2001)
emphasises that the effort at planning in the early stages of a new business is fruitless
because at that moment the entrepreneur has few resources with which to make a proper,
feasible and palpable plan. What actually happens is that the entrepreneur uses a lot of
To plan or not to plan? 365
improvisation to exploit the resources, contacts and knowledge existing and available at
that moment and planning only starts to make sense when risks become more relevant
and meaningful for the business, which usually happens when the business is better
structured and more mature.
Talking about planning in start-ups is, therefore, very different from considering
planning in established businesses. Although the analysis has shown that it has some
influence on survival and growth factors, we do not believe that planning is such a
decisive factor in the survival and growth of already existing businesses and we believe
that future comparative studies with well-established companies could yield considerable
contributions to the field.
Another proposal for future studies would involve a comparison between
entrepreneurs who started their business with prior knowledge and those who acquired
the relevant knowledge after launching their business. In this study it was not possible to
distinguish these constructs because both were included in a single issue during the data
collection, but we believe the results demonstrate that the influence of each construct
would be different in terms of survival and growth of start-ups.
This question raises another issue for analysis: Do entrepreneurs, with prior
knowledge of the business, plan more or less than entrepreneurs with no such
knowledge? The degree of uncertainty perceived by the experienced entrepreneur is less
than that of the inexperienced entrepreneur, therefore, they have less need for planning
since their decisions are more secure. Would a sample with experienced entrepreneurs
running start-ups show any correlation between planning and survival?
5.1 Limitations and suggestions
These reflections present some of the limitations imposed by a secondary database which
prevented the study from exploring related issues. Future studies continuing this research
could investigate the suppositions raised here. Furthermore, we believe that it is relevant
to investigate the relative importance of planning (activities undertaken to draw up plans)
for the consequences or results of planning in a sphere going beyond factors such as
survival, growth and acquiring capital. Other variables can be seen when evaluating the
effectiveness of the planning process in start-ups.
Another line of enquiry pertinent to this same approach concerns the quality of the
plan produced in terms of the results obtained by the company as a result of following its
plan, such as, irrespective of the quality of the plan, the extent to which fulfilling it
attained what had been established and whether there was any relationship between the
differences between the plan and its execution and the survival and performance
We also suggest research to investigate the effectiveness of planning in start-ups
using other performance indicators such as revenue, market share, profitability, ROI and
ROA. The great difficulty in undertaking this type of study in nascent companies in
Brazil is the lack of reliable information in an environment where informality is
ostensibly practiced, and which would result in the publication of unreal, false or
incomplete data.
The most obvious recommendation that this study makes is that it is worthwhile
drawing up a business plan for implementation during the initial phase of an enterprise. A
good business plan could increase the company’s chances of survival and expansion. As
366 C. Borges et al.
this is not a common practice among small businesses, entrepreneurs who acquire the
habit of collecting information, establishing goals and objectives and defining the actions
needed to attain them while dedicating adequate time and effort to carrying out an
in-depth analysis of the environment and the risks involved in alternatives for future
actions acquire significant competitive advantages over those who do not invest in such
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... Thus, do entrepreneurs with prior business knowledge engage in more or less planning than entrepreneurs with no such knowledge? (Borges et al., 2013). For this question, empirical findings are scant and conflicting. ...
... Furthermore, entrepreneurs with abundant experience make decisions more confidently without guidance. Their motivations to make business plans are attenuated (Borges et al., 2013). ...
... We empirically verified that business experience, including entrepreneurial experience and managerial experience, increases entrepreneurs' willingness to engage in business planning. This result, to some extent, is contrary to some scholars' arguments that prior experience will decrease entrepreneurs' motivation to undertake business planning as they possess more knowledge and skills (Dencker et al., 2009;Rotger et al., 2012;Borges et al., 2013). We propose that, through prior business operation, entrepreneurs acknowledge that good preparedness and systematic business planning are desirable for venture creation. ...
Full-text available
The question of why entrepreneurs undertake business planning activities differently, ranging from planning "in the head" to generating formal written documents, is still impenetrable. Aggregating data on 11,064 observations from 32 independent data set, this study meta-analyzed how business experience and gender influence entrepreneurs' disposition to business planning behaviors. Surprisingly, contradictory to some extant views that entrepreneurs without prior experience are more likely to make business plans, we found that both managerial experience and entrepreneurial experience positively influence entrepreneurs' subsequent business planning behaviors. Drawing insight from the effectuation and institutional perspectives, this study showed that, rather than entrepreneurial experience, managerial experience motivates entrepreneurs to generate formal business plans. For entrepreneurs who create formal business plans, both entrepreneurial experience and managerial experience enhance their business planning sophistication. In addition, we examined the moderating effects of gender on the relationship between business experience and business planning. The results suggested that female entrepreneurs with entrepreneurial experience are more likely to undertake business planning behaviors and create formal business plans than their male counterparts.
... The main factor that motivated the study reported in this work was the need to define a methodology containing a set of tools capable of boosting the development of BPM within small companies that do not yet have sufficient informational subsidies for the development of well-founded strategic planning. It is a reality that small companies in Brazil, the country where the study was carried out, develop their activities based on improvisations to explore their resources, starting planning only when they perceive the increased relevance and significance of risks for the company, something that happens when the business is becoming more structured and mature (Borges et al., 2013). To assist in the development of plans in the context of small businesses, a methodology capable of involving the company's personnel in a gamified way was therefore considered, analyzing the structure of internal processes and costs of services offered to customers, to determine optimized values of costs and number of customers served at a time (in classes, since it is a music school), enabling comparisons to be made within a defined period for observations. ...
Purpose This article aims to present a methodology applied to the transition between the “as-is” and “to-be” stages of the Business Process Management (BPM) life cycle, supporting its implementation and maintenance for the organizational stability, using techniques from Operations Research and Information and Decision Theories, applied by a gamified system. Design/methodology/approach The study used Design Science Research, considering the following methodological elements: (1) artifact model, after initial analysis of the organization; (2) problem relevance, incorporating components to the Markov transition matrix and the integer programming model for resource optimization; (3) model evaluation, establishing mechanisms to validate the methodology created; (4) research contributions, showing benefits found; (5) systematic approach, detailing methods used; (6) model's research process, revealing the means for execution; and (7) final presentation of results. Findings After planning three scenarios for the company, containing zero, one or two implemented processes, the matrix of states in the Markov chain effectively identified the states of greater and lesser transition uncertainty. At the same time, the optimization model guided the organization toward a stable change in its operational and financial areas. Practical implications The company's planning capacity has increased, as its managers now have a methodology to promote rational decisions about the development of plans. Before, managers believed that the methodology used was only for large companies. However, this view changed with the results, showing a structured view of the ability to absorb new customers, relocate established ones, increase the comfort level for employees and increase profitability for the company's business. Originality/value The study showed that the combination of techniques opens a new perspective to the incorporation of BPM in organizations, allows a smooth change between the current and future state, making it possible to predict the evolution of transition scenarios.
... Former research has looked at whether planning and prediction activities in terms of written business plans are useful for success (e.g., Borges et al., 2013;Shane and Delmar, 2004;Jungbauer-Gans and Preisendörfer, 1991;Schulte, 2008) with somewhat contradictory results. Indeed, a meta-analysis based on 46 empirical studies confirms that business planning activities are a success factor, that is, they are related to performance, while contextual factors also play a role (Brinckmann et al., 2010). ...
This paper provides two daring insights into entrepreneurial decision-making: First, we show that the cliché of German entrepreneurs as experts of thoroughness and fanatics of planning is not compatible with effectual decision-making (Sarasvathy, 2001). Stereotypically, German entrepreneurs are supposed to use causal decision-making. This challenges the basic assumption of effectuation as a cross-cultural concept. Second, we shed light on the fuzzy role of entrepreneurial expertise for effectuation. Our study is based on a sample of entrepreneurs (N = 560) and a comparison group of non-entrepreneurs (N = 351). We employed a scenario-based questionnaire to examine participants' causal and effectual decision-making. Our ordered logit models reveal that German entrepreneurs use effectual decision-making more often – despite their image of causal and predictive business planning. Surprisingly, the level of entrepreneurial expertise did not influence this tendency. Hence, the role of entrepreneurial expertise and deliberate practice in effectuation theory has to be rethought.
... Former research has looked at whether planning and prediction activities in terms of written business plans are useful for success (e.g., Borges et al., 2013;Shane and Delmar, 2004;Jungbauer-Gans and Preisendörfer, 1991;Schulte, 2008) with somewhat contradictory results. Indeed, a meta-analysis based on 46 empirical studies confirms that business planning activities are a success factor, that is, they are related to performance, while contextual factors also play a role (Brinckmann et al., 2010). ...
... Academic research has tried to investigate the performance impact of the activity of writing a business plan in numerous studies [8], [13], [54], [55], [60], [61]. The empirical evidence on the impact of the activity of writing a business plan, however, is ambiguous in its results [8]. ...
... Academic research has tried to investigate the performance impact of the activity of writing a business plan in numerous studies [8], [13], [54], [55], [60], [61]. The empirical evidence on the impact of the activity of writing a business plan, however, is ambiguous in its results [8]. ...
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This study examined nascent entrepreneurship by comparing individuals engaged in nascent activities (n = 452), after screening a sample from the general population (n=30,427). Due to the large sample size and the utilization of a control group of non-entrepreneurs (n=608), the findings of this study present a new approach to the relationship between human capital, social capital and entrepreneurship. Our primary objective was to help close the significant research gap regarding the sociological characteristics of nascent entrepreneurs, as well as to examine the comparative importance of various contributions and factors, such as personal networks and business classes. Having friends in business and being encouraged by them was a strong predictor regarding who among the general population eventually engaged in nascent activity. The study fails to support the role of formal education in predicting either nascent entrepreneurship or comparative success, when success is measured in terms of the three defined activities — creating a business plan, registering the business, or obtaining the first sale. Of particular note was that attending business classes specifically designed to promote entrepreneurship failed to be associated with successful business paths. This research suggests that national governments considering intervention activities might be wiser to focus on structural relationships than on programs specifically targeted to promote certain entrepreneurial activities. The facilitation of entrepreneurial social capital should be more successful if agencies filter their assistance through previous existing social networks. In addition, our findings suggest that countries that lack a very highly educated population may not be at a particular disadvantage regarding entrepreneurial activities.
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A literatura tem descrito que firmas menores e mais jovens têm, em geral, maior risco de fechamento do que empresas maiores e já estabelecidas em seu setor. O objetivo da pesquisa aqui relatada foi examinar empiricamente o impacto de três fatores que podem prolongar a sobrevivência de empresas nascentes: o capital humano do empreendedor, seu capital social e a adoção práticas gerenciais após a nova firma ser aberta. Com base na amostra de 1.961 empresas abertas e registradas na Junta Comercial do Estado de São Paulo (Jucesp) entre os anos de 1999 e 2003, realizou-se um estudo de cunho quantitativo para verificar a probabilidade de sobrevivência dessas empresas. Algumas variáveis mostraram-se estatisticamente significantes para explicar a probabilidade de sobrevivência da empresa nascente – dentre elas, o grau de escolaridade do empreendedor e da sua preparação prévia antes de abrir o negócio (relacionados a seu capital humano), a existência de pessoas na família com negócios similares (relacionada a seu capital social) e, principalmente, a adoção de práticas gerenciais tais como a busca de antecipar acontecimentos e a procura por informações relevantes. Esses resultados ressaltaram a necessidade de considerar elementos de diferentes abordagens teóricas visando explicar as chances de sobrevivência de novos empreendimentos.
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Business plans are important management tools for new ventures. One indication of their importance is that about 10 million business plans are written each year, world-wide (Gumpert, 2002). Others are that business plans quite frequently surface in entrepreneurship education, governmental promotion of entrepreneurship as well as in the external financing of new ventures. Universities conduct or endorse business plan competitions, including Harvard, Stanford, Wharton and MIT (Honig, 2004). Banks, venture capitalists, angel investors, incubator managers and assistance agencies are other potential promoters of business plans. There are a plethora of books dedicated to explaining how to write business plans, typically suggesting that business planning is valuable and important to the new firm (Poon, 1996; Stevenson, et al., 1999; Timmons, 1999; Lambing and Kuehl, 2000; Wickham, 2001; Kuratko and Hodgetts, 2001). It is fair to say that the entrepreneurship field abounds with advice about how to write business plans.
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Studies the theory of effectual reasoning with focus on the creation of firms in nonexistent or not-yet-existent markets. Effectuation takes "a set of means as given" and focuses "on selecting between possible effects that can be created with that set of means." The effectuation process is actor dependent whereas the causation process is effect dependent. Some key characteristics of effectuation are: selection criteria based on affordable loss or acceptable risk, excellence at exploiting contingencies, and explicit assumption of dynamic, nonlinear, and ecological environments. The theoretical works of March, Mintzberg, and Weick are explored to identify connections between their work and the proposed theory of effectuation. Recent empirical works that fall outside of the traditional causation models are also discussed. The four principles of effectuation are affordable loss, strategic alliances, exploitation of contingencies, and control of an unpredictable future. Based on these principles, a series of testable hypotheses are presented. The hypotheses consider the role of effectuation at different levels including the economy, the market or industry, the firm, and the founders/decision makers. The theory of effectuation advanced in this analysis concludes that the essential agent of entrepreneurship is the effectuator. (SRD)
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The factors leading nascent entrepreneurs to expend effort writing business plans are examined and the effect such planning has on new organizations is considered. This is part of a larger consideration within institutional theory about whether or not conformity leads to profitability or survival. There were 396 nascent Swedish entrepreneurs investigated over a four consecutive six-month periods. Both the production of the plan and the outcomes were examined. New organizations are subject to institutional pressure to produce written business plans - they are expected to plan, they imitate other successful organizations, or they are told to plan. The findings show that institutional variables (such as coercion and imitation) predict the likelihood for new organizations to write business plans. The study's results are more in line with institutional predictions and are contrary to rationalist predictions of planning-performance. Conclusions indicate that writing a business plan has no significant effect on the survival or profitability of the new organization. (TNM)
This paper derives a model of organization life cycles in three steps: (1) by considering relationships of power distribution inside an organization with that around it, a typology of six configurations of organization power is produced; (2) by considering intrinsic forces that work within each of these configurations to destroy it, the likely transitions between these configurations are identified; and (3) by stringing these transitions together in sequences over time as organizations survive and develop, the model is developed. Some implications of such a model in a society of large organizations are addressed briefly in conclusion.
The goal of this review of venture-creation literature is to answer why, when, and how different modes of action are used to exploit entrepreneurial opportunities.Extant research about the role of individuals in entrepreneurship is summarized and critiqued, and directions for future research are suggested. New ventures are the direct outcome of individuals' intentions and consequent actions.New venture-creation comprises: (1) entrepreneurial intention, (2) opportunity search and discovery, (3) decision to exploit the opportunity by new venture creation, and (4) exploitation activities leading to the first sale. Past research into the entrepreneurial profile has been largely unsuccessful. This literature review is limited to individual differences (or characteristics) that influence development of entrepreneurial intentions, opportunity search and discovery, decision process, and subsequent action. Future research should examine the generalizability of findings to other countries.Examining judgments made during venture creation should help understand starting and succeeding in new ventures. Information about venture creation and activities should be based on primary data gathered directly from entrepreneurs (instead of using students as proxies); suggestions are offered on how to gather such data. (TNM)
This study examined whether writing a business plan before launching a new venture affects the subsequent performance of the venture. The data set comprised new ventures started by Babson College alums who graduated between 1985 and 2003. The analysis revealed that there was no difference between the performance of new businesses launched with or without written business plans. The findings suggest that unless a would-be entrepreneur needs to raise substantial startup capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan before opening a new business.