Does Business Planning Facilitate the Development of New Ventures?

Many prior researchers have criticized business planning, arguing that it interferes with the efforts of firm founders to undertake more valuable actions to develop their fledgling enterprises (Bhide, 2000; Carter, Gartner, and Reynolds, 1996). In this paper, we challenge this negative view of business planning, arguing that business planning is an important precursor to action in new ventures. By helping firm founders to make decisions, to balance resource supply and demand, and to turn abstract goals into concrete operational steps, business planning accelerates product development and organizing activity in new ventures. Empirically, we examine 223 new ventures initiated in the first nine months of 1998 by a random sample of Swedish firm founders. Using fixed-effects regression on panel data collected at six-month intervals during the first 30 months of the lives of the ventures, we provide empirical support for our hypotheses.