Karlsson - Judging a business by its cover
A business plan seems like an important tool for new ventures, Karlsson however argues
differently. He argues that the act of writing a business plan is mostly useful in order to gain
legitimacy towards institutionalized organizations, like the government. Through the strategy
of loose coupling, entrepreneurs adhere to the apparent demand for a business plan, as it
indicates a well-though through plan/organized venture, but run day to day activities not
based on the plan. Making this loose connection, means entrepreneurs are free from
constraints in running their business but keeping external parties satisfied by signalling that
they comply to a specific standard or behaviour without actually doing it.
According to Karlsson, most planning effort was found in the start-up phase, and the
correspondence between the planning and actual strategy were highest during the start-up
phase. In time both decreased.
Looking at the linkage between a business plan and financial performance, it is assumed that
the positive effect of planning are due to effects on internal coordination and control. Though
if entrepreneurs use loose coupling strategies, this linkage might not exists. The arguments of
a business plan positively affect the entrepreneurs motivation, might also be no-existent due
to the same reason. Karlsson concludes that writing a business plan is largely an symbolic
activity to gain legitimacy and secondly a marketing activity. Even if entrepreneurs at first
think of a business plan as important they learn of its actual value and seize to update it.
On the legitimacy aspect, the need for a business plan is generally accounted to banks and
capital investors, as a means of convincing them. Though Karlsson states that both don't
really consider it as the most important part. It does have an positive effect, but whether or not...