Perceiving the Value of Business Planning
The value of business planning has been subject to much controversy over the past years. In-deed, there appears to be an escalation in empirical research, with opposing implications and diverging approaches to teaching entrepreneurship. Most empirical studies have taken an ex-post, comparative view of the relationship between planning and performance. In this paper, we introduce an ex-ante perspective by formally characterizing the decision of the nascent entrepreneur whether or not to start a business and whether or not to plan beforehand. We focus on the evaluative function of business planning, define the information value of busi-ness planning, identify its influencing factors, and show how costs of business planning de-termine the quality of planning. We find as the crucial aspect of good evaluative business planning that it helps to identify and to sort out poor business ideas before they reach the mar-ket. We contrast our results with conclusions drawn from empirical studies that have been critical of planning. In a setting in which, by construction, planning has a positive value, we question several popular negative implications by showing how they result from an incom-plete sample of entrepreneurs.
|Date of creation:||May 2009|
|Contact details of provider:|| Postal: Universitätsplatz 2, Gebäude W und I, 39106 Magdeburg|
Phone: (0391) 67-18 584
Fax: (0391) 67-12 120
Web page: http://www.ww.uni-magdeburg.de
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:mag:wpaper:09017. 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: (Guido Henkel)
If references are entirely missing, you can add them using this form.