Advanced Search
MyIDEAS: Login

The value of business planning before start-up — A decision-theoretical perspective

Contents:

Author Info

  • Chwolka, Anne
  • Raith, Matthias G.
Registered author(s):

    Abstract

    In this paper we analyze business planning from the perspective of the nascent entrepreneur. We measure its value for the entrepreneur at the point where he must decide whether or not to plan, and we contrast our results with empirical studies that compare firms' performance after market entry. Within a formal decision-theoretical framework we show that the value of planning is driven by the possibility of evaluating alternative actions and being able to improve strategies. Before market entry, the main purpose of evaluation is to pursue good and terminate bad business ideas. We show how the value of planning is determined by the venture under consideration and how it depends on the quality of planning. Our theoretical model yields several behavioral and statistical implications that we compare with empirical observations found in the literature. In particular, we show how our model of rational decision making can be used to explain important hypotheses and contradictory observations that have fueled the debate on business planning.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S0883902611000140
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 27 (2012)
    Issue (Month): 3 ()
    Pages: 385-399

    as in new window
    Handle: RePEc:eee:jbvent:v:27:y:2012:i:3:p:385-399

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/jbusvent

    Related research

    Keywords: Business plan; Start-ups; Entrepreneurship; Decision Making; Uncertainty;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Shane, Scott & Delmar, Frederic, 2004. "Planning for the market: business planning before marketing and the continuation of organizing efforts," Journal of Business Venturing, Elsevier, vol. 19(6), pages 767-785, November.
    2. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
    3. Marc Gruber & Ian C. MacMillan & James D. Thompson, 2008. "Look Before You Leap: Market Opportunity Identification in Emerging Technology Firms," Management Science, INFORMS, vol. 54(9), pages 1652-1665, September.
    4. Brinckmann, Jan & Grichnik, Dietmar & Kapsa, Diana, 2010. "Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning-performance relationship in small firms," Journal of Business Venturing, Elsevier, vol. 25(1), pages 24-40, January.
    5. Harald Strotmann, 2007. "Entrepreneurial Survival," Small Business Economics, Springer, vol. 28(1), pages 87-104, January.
    6. Ashish Arora & Andrea Fosfuri, 2005. "Pricing Diagnostic Information," Management Science, INFORMS, vol. 51(7), pages 1092-1100, July.
    7. Gruber, Marc, 2007. "Uncovering the value of planning in new venture creation: A process and contingency perspective," Journal of Business Venturing, Elsevier, vol. 22(6), pages 782-807, November.
    8. Jianwen Liao & William Gartner, 2006. "The Effects of Pre-venture Plan Timing and Perceived Environmental Uncertainty on the Persistence of Emerging Firms," Small Business Economics, Springer, vol. 27(1), pages 23-40, August.
    9. Cooper, Arnold C. & Woo, Carolyn Y. & Dunkelberg, William C., 1988. "Entrepreneurs' perceived chances for success," Journal of Business Venturing, Elsevier, vol. 3(2), pages 97-108.
    10. Townsend, David M. & Busenitz, Lowell W. & Arthurs, Jonathan D., 2010. "To start or not to start: Outcome and ability expectations in the decision to start a new venture," Journal of Business Venturing, Elsevier, vol. 25(2), pages 192-202, March.
    11. Mathew L. A. Hayward & Dean A. Shepherd & Dale Griffin, 2006. "A Hubris Theory of Entrepreneurship," Management Science, INFORMS, vol. 52(2), pages 160-172, February.
    12. Karlsson, Tomas & Honig, Benson, 2009. "Judging a business by its cover: An institutional perspective on new ventures and the business plan," Journal of Business Venturing, Elsevier, vol. 24(1), pages 27-45, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:jbvent:v:27:y:2012:i:3:p:385-399. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.