Business plans are widely spread among new businesses, and they are supported by various universities, governmental assistance agencies, management consultants and a wide array of literature. Business plans are often taken for granted as highly useful tools that should be frequently updated and used. This study is based on data from six companies and their environments, over five years, using several forms of data collection such as interviews, observations, and archival data. In contrast to previous studies, we found that initial conformity to business plan norms gradually and without exception lead to loose coupling. Entrepreneurs who wrote business plans never updated or rarely referred to their plans after writing them.

In the process of starting new ventures, entrepreneurs typically reallocate existing resources to new uses. These resource reallocations challenge the status quo, and are therefore often viewed with suspicion by others (Aldrich & Fiol, 1994). Thus, entrepreneurs need to convince others that the actions required of their new venture are desirable, proper and/or appropriate - they need to gain legitimacy. Institutional theory holds that new ventures have to conform to institutional pressures in order to gain legitimacy. Legitimacy is essential for the new ventures' chances of survival (cf. Aldrich & Auster, 1986; Aldrich, 1999; Stinchcombe, 1965; Singh, Tucker, & House, 1986). For example, a new venture's reputation facilitates its entry into business networks, which enhances growth (Larson, 1992) and an individual's associations with government agencies and community organizations have positive effects on business founding and survival (Baum & Oliver, 1996). Consequently, institutional theory may lead us to expect that those new ventures that adapt most to institutional pressures would have the greatest chances of success. At the same time, entrepreneurship research suggests that new ventures are more prone than established firms to break away from established patterns of behavior. New ventures have become a major source of innovation and the creation of new technologies (Acs & Audretsch, 1990). These creative organizations and new technologies are difficult for established companies to imitate, leading some new ventures toward industry leadership positions (Utterback, 1994), as well as creating wealth for the owners and the society (Birch, 1987; Dahlqvist, 1998; Davidsson, Lindmark, & Olofsson, 1996; Storey, 1994). Thus, there is an unresolved paradox between the findings of entrepreneurship research that new ventures tend to break established patterns; and institutional theory's focus on the need for conformity to rules and legitimacy. However, recent conceptual developments in institutional theory potentially provide us with tools to resolve this paradox. It has been suggested by many institutional theorists that a more diverse image of organizational responses to institutional pressures must be offered (Beckert, 1999; Judge & Zeithaml, 1992; Oliver, 1991). In this chapter, we utilize such an approach. Organizational responses are influenced by the nature of institutional pressures, the congruence between different institutional pressures facing an organization, the coherence between the institutional pressures and the goals and strategies of the organization, and the extent to which different institutional pressures are enforced; as well as by the overall environment the organization is performing in. A repertoire of organizational responses to institutional pressures is thus conceivable (Oliver, 1991). While recent additions to institutional theory may provide insights into how new ventures deal with institutional pressures, little, if any, empirical research has been done that examines how different institutional fields influence strategic options and outcomes. Recent literature has begun to focus on the various aspects of internationalization of new and small businesses (Oviatt & McDougall, 1994; Wright & Ricks, 1994; Westhead, Wright, & Ucbasaran, 2001). Despite some recent efforts for systematic comparisons between countries (Reynolds, Bygrave, Autio, Cox, & Hay, 2002), most entrepreneurship research analyzes new venture creation and entrepreneurship from a micro-level perspective, taking the local or national institutional environment as given. In this study, we argue for a cross-national comparative framework to better understand how responses to institutional pressures influence young organizations in different institutional fields. © 2005 Elsevier Ltd. All rights reserved.

This thesis is about business plans in new ventures. It takes an institutional perspective with a particular focus on how external actors influence ventures through norms, regulations and way of thinking.

Through an intensive study of six new ventures at a business incubator, and a structured, computer-aided analysis, this study probes the following questions: How are new ventures influenced to write business plans, and what sources influence them? What strategies do new ventures use to deal with those influences? What are the consequences of the chosen strategies?

The findings show that entrepreneurs hold strong pre-understandings generated through books and their educational backgrounds. This influences their decisions to write business plans. This pre-understanding may be stronger than the actual external pressure to write the plan. This is indicated by two observations.

First, the studied entrepreneurs write business plans before meeting with external constituents. The external constituents attach some importance to written business plans, but they do not consider plans crucial. Second, new venture managers loose couple the plan from their actual operations. Even the ones with the best intentions to consistently update the plan do not do it. They indicate that their business model develops too quickly and that they want to focus on doing business instead of writing about it.

We may think that inconsistency between the plan and actual operations may aggravate stakeholders. However, entrepreneurs do not show their business plan to many external actors. Moreover, the external actors in this study rarely demand having a look at a business plan. Neither do they check to see if it is an updated one. The internal consistency of new ventures may be difficult and costly to investigate, and loose coupling could be conducted without loss of legitimacy. It is performance of the venture rather than formal appropriateness that drives legitimacy.

Theoretically, this study develops a framework for understanding why new ventures write business plans (despite their questionable effects on efficiency and legitimacy). Companies are influenced by the ease and norms about business plans. In this way, their bounded choice to adopt the business plan institution becomes rational. The symbolic adoption of a business plan also generates a mimetic pressure for adoption, since mimicry often does not hinge on in-depth investigation of the mimicked organization.

This research utilizes a longitudinal methodology to study the entrepreneurial learning strategies of a representative sample (n= 173) of nascent entrepreneurs in Sweden. We examine Sarasvathy’s theory of effectuation with respect to six different learning strategies and their effect on the progression of start-up processes. The results show that the progression of the start-up process, as represented by the number of gestation activities undertaken during each time period, is systematically related to the nascent entrepreneur’s learning strategy. The analysis covers 24 months, and findings indicate that learning strategies associated with effectuation processes have positive effects on the progression of the start-up process. We also found positive effects from persistent learning strategies in the progression of the start up process.

In this study, we examined factors that led nascent organizations to write business plans, following 396 nascent entrepreneurs during a two-year period. We examined both the production and the outcomes of written business plans produced in nascent organizations. Our findings show that institutional variables, such as coercion and mimetic forces, are important predictors influencing the propensity of new organizations to write business plans. Our results are contrary to rationalist predictions of planning-performance, and are more in line with institutional predictions. Interestingly there was no evidence to support positive outcomes, in terms of profitability, for those nascent organizations that produced business plans during a two-year initial period. We discuss the implications for institutional theory and studies of nascent businesses, as well as for the literature on business planning.