Journal of Management

http://jom.sagepub.com

Institutional forces and the written business plan

Benson Honig and Tomas Karlsson
Journal of Management 2004; 30; 29
DOI: 10.1016/j.jm.2002.11.002
The online version of this article can be found at:
http://jom.sagepub.com/cgi/content/abstract/30/1/29

Published by:
http://www.sagepublications.com

On behalf of:

Southern Management Association

Additional services and information for Journal of Management can be found at:
Email Alerts: http://jom.sagepub.com/cgi/alerts
Subscriptions: http://jom.sagepub.com/subscriptions
Reprints: http://www.sagepub.com/journalsReprints.nav
Permissions: http://www.sagepub.com/journalsPermissions.nav
Citations http://jom.sagepub.com/cgi/content/refs/30/1/29

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

Journal of Management 2004 30(1) 2948

Institutional forces and the written business plan

Benson Honig
Graduate School of Business, and International Affiliate, University of Haifa,
Mount Carmel, 31905 Haifa, Israel

Tomas Karlsson
Jnkping International Business School, Box 1026 SE-55111, Jnkping, Sweden
Received 1 March 2002; received in revised form 9 October 2002; accepted 19 November 2002

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.
2003 Elsevier Inc. All rights reserved.

The writing of a business plan is an activity extensively endorsed by recent literature, venture capital firms, governmental support agencies, and universities (Ames, 1989;
Hindle, 1997; Kahrs, 1995; Maitland, 1996). In fact, business planning can be considered
to be one of the most widely regarded aspects of pre-startup planning. We define a business
plan as a written document that describes the current state and the presupposed future of an
organization. Despite their ubiquity, a serious research gap exists regarding why new organizations write business plans, and what consequences result from them (Castrogiovanni,
1996). The value and positive effects of business plans have been taken for granted rather
than critically studied. In this research, we examine a number of factors influencing why
individuals expend effort writing business plans, as well as exploring outcomes to assess
what, if any, effect the planning process has on new organizations.

Corresponding author. Tel.: +972-4-8249582; fax: +972-4-8249194.

E-mail addresses: benson@research.haifa.ac.il (B. Honig), tomas.karlsson@ihh.hj.se (T. Karlsson).
0149-2063/$ see front matter 2003 Elsevier Inc. All rights reserved.
doi:10.1016/j.jm.2002.11.002
Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

30

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

Scholars in a variety of disciplines have been interested in identifying conditions that

facilitate the spread of common practices. Research examining the diffusion of planning
frequently emphasizes the rational aspects of planning (Rhyne, 1986). From this perspective,
business plans should yield more efficient and economically viable new firms. Plans are
claimed to provide practical benefits to new organizations, such as greater profits and other
competitive advantages that may lead to a higher probability of long-term survivability.
In the rational view, more successful firms will have been planning firms, and so they will
signal to the market the positive attributes to be gained through effective planning. Empirical
research on the economic outcomes of business planning has been inconclusive, with some
maintaining that planning assists with the growth and success of new firms (Bracker, Keats
& Pearson, 1998; Schwenk & Shraeder, 1993), and others failing to find any association
(Boyd, 1991; Robinson & Pearce, 1983).
One alternative to a strictly rational economic perspective is the institutional view (Mezias,
1990; Mezias & Scarselletta, 1994). A key interest in institutional theory is how social relationships and actions become taken for granted, and how our cognitive set of shared
meanings and possible actions are constructed (Dacin, 1997). Benefits claimed to accrue to
pre-startup planning include both symbolic and legitimating forces that may generate indirect effects on survival (Castrogiovanni, 1996). In this research, we examine antecedents
to, and outcomes of, writing business plans. We use the results to reflect upon institutional
perspectives as well as that of economic rationality.

Testing the Impact of Institutional Sources

Institutional theory suggests that institutionalization is a social process by which structures, policies, and programs acquire taken for granted status (Meyer & Rowan, 1977).
Many studies with an institutional perspective focus on the issue of why organizations
seem not only to take things for granted, but also why assumptions spread and make
organizations more similar. Institutional forces drive organizations to become similar in
the ways in which they act and in how they develop. Firms homogenize. The concept
that best captures the process of homogenization is isomorphism (DiMaggio &
Powell, 1983). Outside actors assume new organizational managers have written/should
write a business plan. This leads us to believe that institutional pressures play an important
role in the homogenization of nascent organizations with respect to the written business
plan.
Although our knowledge regarding the institutional pressures in large/old organizations is
extensive, information about the institutional forces on new organizations is scarce. Nascent
organizations are commonly assumed to be strongly subject to market forces. Greenwood
and Hinings (1996) argue that new organizations and new institutional fields are less constrained than their larger and older counterparts. Using a similar argument, institutional
pressures are said to be more salient in mature institutional fields (Baron, Dobbin &
Jennings, 1986). In contrast, Stinchcombe (1970), and later Aldrich and Fiol (1994), argue
that new organizations in new institutional fields are strongly subjected to institutional rules.
They point out that new organizations do not yet have access to social networks, and so have
a greater need to prove themselves in order to gain legitimacy. Thus, these two competing

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

31

Figure 1. Institutional sources, institutional pressures, and business planning behavior.

institutional views of newness vis--vis institutional forces represent an issue that remains
largely unresolved, and provide an interesting and important issue for empirical study.
Drawing upon an institutional framework, we suggest that business planning behavior in
nascent organizations is best explained as a result of isomorphism, which is created by institutional agents. While many studies of institutional processes focus on the self-reinforcing
process of institutionalization, we study who and how institutionalization is reinforced. In
Figure 1, the relationship between institutional agents, institutional pressure and behavior
is depicted.

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

32

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

Institutional pressures are of three kinds: coercive, mimetic, and normative (DiMaggio &
Powell, 1983). We view these primary pressures as upheld by specific institutional sources.
Coercive pressures are upheld by government agencies, normative by the educational system and mimetic by other organizations within the institutional field (Karnoe, 1995). We
hypothesize two outcomes of such conformity: That it leads to improved possibilities for
survival, and second, that it leads to improved possibilities for creating a profitable business. While Karnoe tests this analytical framework in a qualitative comparative study of the
wind turbine industry in Denmark and the USA, we utilize this analytical framework in a
quantitative study on new organizations in Sweden.
Governmental Agencies
Coercive isomorphism is the result of formal pressures on organizations by exogenous
forces (Meyer & Rowan, 1977; Oliver, 1991). In the case of business planning, to our knowledge there is no legislative framework that coerces organizations to write business plans, but
there are other formalized pressures that influence new organizations into doing so. Nascent
firms frequently have contact with assistance agencies at both national and regional levels.
Examples include the SBA (Small Business Association) in the USA, employment offices,
regional development facilities and incubators, worldwide. These organizations often place
constraints on nascent entrepreneurs, mandating that specific resources or various forms of
assistance are contingent on their participation in other unrelated activities (Honig, 1998). In
Sweden, public agency offices provide potential entrepreneurs with technical and financial
support on condition that they complete an approved business plan. As one respondent in
our pilot study stated:
it (writing a business plan) was really about getting access to the government subsidies
for starting up your own business, cause they wanted a business plan from everyone who
tried to start up their own company.
This leads to our first hypothesis:
Hypothesis 1: Nascent organizations whose founders contact public support agencies
have a greater propensity to produce business plans than those without such contact.
Industrial Field
Mimetic isomorphism is often a result of organizations attempting to limit uncertainty
by modeling their behavior after similar successful organizations in their field (DiMaggio
& Powell, 1983; Haunschild, 1994; Haverman, 1993). An entrepreneur familiar with the
business plan written by a known successful entrepreneur may endeavor to write one him
or herself. From a procedural point of view, TQM, SWOT analyses, and business plans
all represent diffusion based on mimetic opportunities that appear in particular sectors. For
example, in a recent study of manufacturing firms, all 29 cases were found to utilize business
plans, reviewed either annually or at 18-month intervals (Brown, 1998).
Mimetic behavior may also be the result of attempts to gain legitimacy in the eyes of other
members of the organization. Actors may provide what seems to be a rational approach to
planning, one that appears to have succeeded elsewhere. We theoretically and empirically

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

33

distinguish mimetic isomorphism from coercive and normative forces. Thus, we attempt to
empirically isolate the individual effects of these forces. Very few studies explicitly control
for coercive and normative influences, a critical factor when attempting to isolate mimetic
isomorphism (Mizruchi & Fein, 1999).
Institutionalization is frequently determined by industry location, where mimetic processes are easily observed. Mature industries provide the opportunity for mimetic isomorphism because new entrants have an opportunity to observe and learn from the established
competitors (Castrogiovanni, 1996). The emergence and diffusion of the Hollywood studio
system is one such example (Lampel & Shamsie, 2000). Jones (2001) demonstrated the
liability of new industries by showing how legitimating forces redefined the development
of the film industry, as it migrated from regulatory to cultural legitimacy. In the emerging
film industry, institutional rules changed for both technological entrepreneurs and content
(cultural) entrepreneurs, so altering the mimetic approaches taken by competitors as the
environment matured. Only once the rules of the game were well entrenched, were a
common set of strategic mimetic approaches possible and/or desirable.
New organizations imitate existing organizations within their industry, particularly in
aspects deeply embedded into the industrial sectors cultural norms. This method of measuring mimetic isomorphism has been used by several researchers. Mezias, for example,
examined the accounting practices of the largest 200 nonfinancial corporations in the USA
for generally accepted accounting principles, and Burdos examined the adoption of early
retirement programs in Canadian Universities (Burdos, 2001; Mezias, 1990).
Manufacturing firms are subjected to similar physical and structural constraints, as well
as engaging in more precise, unforgiving, mature and developed processes. They require
highly specialized plants with similar human capital, technical, and infrastructural resources.
They have been observed to engage in mimetic processes irrespective of economic or efficiency gains. For example, in a study examining 39 automotive assembly plants worldwide,
high-involvement work practices similar to those practiced by Japanese manufacturers diffused irrespective of efficiency gains, such as reduced defects. Further, the rate of adoption
of the practices was found to be independent of complementary practices and technologies
or factory productivity (Pil & Macduffie, 1996). We maintain that manufacturing firms are
more likely to undertake similar mimetic planning activities than other sectors, such as
sales, marketing, and services, whose fundamental processes are more amenable toward
new modes of operation, and are more flexible in their structure.
Hypothesis 2: Nascent organizations in industries where business planning is deeply
rooted have a greater propensity to produce business plans than those in other industrial
fields.
Normative
Normative isomorphic forces influence customary and professional procedures and activities deemed socially expected and responsible (Meyer, Ramirez & Soysal, 1992). Writing a
business plan provides legitimacy, signals professionalism and indicates that the person(s)
involved are serious to the outside world. For those individuals who do not otherwise
obtain any particular benefits from the activity, we suspect normative forces to be central.

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

34

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

The entrepreneurship field abounds with normative literature setting out prescriptions
for the creation of a ventures entrepreneurial business plan (Hindle, 1997: 2). The worldwide growth of the business school at both the undergraduate and MBA level, along with
the increasing professionalization and diffusion of management education, are normative
processes in their own right. The interests of such stakeholders converge on a number of
relevant points. Courses that typically instruct students in the art of writing a business
plan support academic scholarship, appointments, journals, conferences, and doctoral programs. Consequently, the publication of business plan literature that escalated beginning in
the 1980s yielded several influential texts (e.g., Ames, 1989; Fry & Stoner, 1985; Hisrich &
Peters, 1989; McDermott, Vecchi & McKenna, 1986; McKenna & Oritt, 1981; Timmons,
1980). Common to these books and articles are a focus on new or small firms, arguments
for and against business plans, and a structure of anywhere from 13 to 200 bullet points that
entrepreneurs should cover, when he/she writes a business plan. As one of our respondents,
a graduate in business studies at the university level, stated in our pilot study:
In school it was very important. A business plan is definitely the first thing that you
should think of (when you start a new firm).
We thus include the importance of business education in our third hypothesis:
Hypothesis 3: Nascent organizations whose founders have a business education have
a greater propensity to produce business plans than those whose founders do not have a
business education.
Outcomes of Institutional Conformity
We test two outcomes of writing a business plan, the first that institutional conformity
leads to survival, and the second that it leads to increased profitability. As indicated in Figure
1, we test survival and profitability separately, for two different reasons. First, we wish to
add to the debate within institutional theory regarding whether or not conformity leads to
profitability or survival (Greenwood & Hinings, 1996; Scott, 2000). Second, we use these
outcomes to evaluate the economic rational explanation regarding why business plans are
written. If the argument is valid, writing a plan should result in beneficial outcomes such as
survival or profitability.
Survival
The relationship between business planning and survival of the nascent organization has
implications for arguments based both on economic rationality and institutional theory.
From an economic point of view, survival represents the success of the organization. From
an institutional perspective, completing a business plan yields the nascent entrepreneur
increased legitimacy, even in the event of sustained economic losses. Legitimating can be
a particularly difficult factor either constraining or supporting growth of the new venture
(Aldrich & Fiol, 1994). It can be a matter of life and death for the new organization, as
audiences are more likely to supply resources to organizations that appear desirable, proper,
or appropriate (Parsons, 1956) and less likely to do so if they are not (Suchman, 1995).

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

35

Institutional theorists often use survival as a dependent variable that, when correlated with
conformity, indicates that conformity legitimates (Meyer & Rowan, 1977; Oliver, 1991;
Parsons, 1956). Further, survival is a variable commonly used as a dependent variable when
measuring performance in nascent organizations.
Hypothesis 4: Producing business plans will increase the probability of a nascent organizations survival.
Profitability
Business plans are based on the premise of the rational economic actor. From this
perspective, the business plan is a rational activity that assists the owners of new firms
(entrepreneurs) to earn larger profits through efficiency gains and/or increased sales. The
apparent success of the business plan paradigm is seen as proof that most firms receive
considerable value from producing business plans. Testing this variable relates our study to
previous studies conducted about business planning and performance (Boyd, 1991; Bracker
et al., 1998; Rhyne, 1986; Schwenk & Shraeder, 1993).
From an institutional perspective, there are two ways of looking at the antecedents of isomorphism; institutional isomorphism and competitive isomorphism (DiMaggio & Powell,
1983). Institutional theory holds that organizational conformity to institutional pressures
is a result of a willingness to conform to institutionally prescribed expectations (Meyer &
Rowan, 1977). Non-conformity is unwanted, and seen as an awkward or deviant behavior.
Such behavior may be shunned, and damages the organizations legitimacy and long-term
possibilities for survival. However, institutional isomorphism occurs even though the actual
behavior is not competitive and profitable. Believers in competitive isomorphism argue that
isomorphism occurs because competitive forces weed out non-competitive forms, or that
certain environments have different sets of technologies that must be dealt with in specific
ways (Slack & Hinings, 1994). Thus, arguments from a competitive isomorphic standpoint
resemble those from an economic rationality standpoint.
Hypothesis 5: Producing business plans is positively correlated with the probability of
a nascent organizationss reaching profitability.
Methods
In this research, we examine the role of business planning for 396 nascent entrepreneurs
during four consecutive six-month periods. The study was preceded by interviews with four
nascent entrepreneurs. Some anecdotal support for our first three hypotheses was drawn from
these interviews.
Sample
The study of emerging organizations is important, but is currently in its infancy (Carter,
Gartner & Reynolds, 1996; Katz & Gartner, 1988). A major reason is that nascent organizations are inherently difficult to study. Most of them do not show up in firm databases, as they

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

36

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

have not yet registered their firms. Neither are they captured in databases because of tax
payments or the like. Consequently, data about them are not are not readily obtainable from
traditional sources. This research was therefore uniquely designed to provide population
estimates for business start-up efforts, and to follow a random sample of nascent activities
leading to the possible start of new businesses by studying so called gestation activities. As
such, it is one of the first of its kind, studying a representative sample of genuinely new
organizations.
Data are based on two samples of randomly selected individuals living in Sweden, individuals aged between 16 and 70 years and individuals aged between 25 and 44 years. The
purpose of the first sample was to get a representative sample of the adult population in Sweden, and the second to increase the yield of nascent entrepreneurs, as indicated by previous
research (Reynolds, 1997). An enriched 25- to 44-year-old cohort biases our population.
This oversampling was done to increase the yield of nascents. Because nascent entrepreneurs
constitute a small group in society, every respondent went through a screening interview
with the objective of selecting out the nascent entrepreneurs. We randomly selected 35,971
individuals for telephone interviews. Of those contacted by telephone, 30,427 individuals
(84.6%) agreed to participate. Only a few of them were currently starting a business. A final
sample of 396 verified and accessible nascent entrepreneurs were identified, who form the
basis for our analyses.
We believed that six-month periods would provide adequate time for changes in the gestation or formulation of the firm to take place, as well as a useful balance between research
resource constraints and respondent cooperation. Successive surveys were conducted on
the nascent entrepreneurs after 6, 12, 18 and 24 months. A range of supplemental longitudinal questions were asked, including changes in the profitability or survival of the nascent
venture. We were thus able to identify nascent entrepreneurs that failed to survive, or experienced at least one period of profitability, by periodically sampling a 24-month period of
nascent activity.
Variables
Dependent variables. We examined two outcomes of writing a business plan to test
Hypotheses 4 and 5. Survival was defined as continuance of a project throughout the time
horizon of the study. A dummy variable was coded as 1 if the project survived throughout
the time horizon and zero if it was abandoned at any point during that time horizon. This
was done to better understand the relationship between business planning and longevity
during the nascent stage. Those firms, whose owners indicated that they were profitable at
any of the survey interviews, during the 6-, 12-, 18-, or 24-month intervals, were identified
as profitable. As profitability is both nominally essential and a primary goal of SMEs, we
consider this to be a particularly good indicator of successful nascent activity.
We examine those that indicated they wrote a formal business plan for external use.
Confirmation of writing a business plan was in response to the following two questions: First,
nascents were asked Have you prepared a business plan? We found that some individuals
who provided an affirmative response were referring to non-written plans they held in their
minds. We thus followed affirmative replies to the following question: What is the current
form of your plan? Is it unwritten (in your head), informally written for internal use, formally

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

37

prepared for external use, or something else? Because we were unable to verify measures
of quality or completeness of the written business plans (e.g., something scribbled on a
napkin), we analyzed only those who identified they had formally written plans for external
use as having completed a business plan. We used this as the dependent variable in the first
three hypotheses, and as an independent variable to test Hypotheses 4 and 5.
Independent variables. As independent variables for Equations 1 and 2, we used the variables deducted from institutional theory. Contact with a business support agency indicated
coercive pressure. Interviews with both agencies and respondents showed that completing
a business plan was frequently a required conditional activity in order to obtain further financial and/or training assistance. A dummy variable was created identifying those nascent
entrepreneurs who indicated they had contact with a business support agency. Our indicator
of normative pressure measured if a nascent entrepreneur had completed a business class.
During our interviews, individuals who experienced business education cited this experience in support of the importance of writing a business plan, whether or not they themselves
did so. Business education is well known to follow particular trends and fads (Abrahamson,
1991), and we predicted that nascents who experienced business education would demonstrate their exposure to normative planning forces. A dummy variable indicated those who
completed a business class. We used industry measures to identify mimetic isomorphism by
identifying the completion rates of nascents by industrial sector. We initially coded dummy
variables for industry by service, trading, manufacturing, and undeclared, examining the
outcomes. Manufacturing firms represented the highest percentage of firms that completed
business plans. As the previous research and theory discussed earlier supported this finding,
we used nascent entrepreneurs in the manufacturing sector to indicate mimetic isomorphism.
Control Variables
We use the same control variables in all equations. Human capital, such as University
education, work experience, and non-formal education, such as adult education, are investments that may produce labor productivity increases (Becker, 1964; Schultz, 1959). In
theory, human capital should provide the entrepreneur with the ability to be more effective
in their organizational activities, administrative systems and routines (Preisendorfer & Voss,
1990; Svelby, 1997). Previous research has demonstrated a range of results regarding the
relationship between education, entrepreneurship and success, with education frequently
producing non-linear effects in supporting the probability of becoming an entrepreneur, or
in achieving success (Evans & Leighton, 1989; Honig, 2001; Reynolds, 1997).
We controlled for human capital in several ways. Owners indicated the highest level of
education they had completed, and this was coded into number of years. Respondents were
also asked their total years of full time paid work experience in any field, with an additional
variable for years of supervisory or managerial experience. Individuals who had previously
attempted a start-up were also noted, indicated by a dummy variable.
Social capital refers to the ability of actors to extract benefits from their social structures,
networks, and memberships (Lin, Ensel & Vaughn, 1981; Portes, 1998). Social networks
provided by extended family, community-based, or organizational relationships may enhance the effects of education, experience, and financial capital (Bourdieu, 1983; Coleman,

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

38

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

1988, 1990; Loury, 1987). Social networks may assist entrepreneurs in creating firms, as
they often start businesses related to their former occupations (Cooper & Dunkelberg, 1986).
Most of our social capital control variables were designed to examine individual networks.
Parental networks were coded from if either parent had ever owned a business before. A
variable was also constructed for those individuals who indicated that their family, relatives,
and close friends were encouraging of their starting a business. We included two factors that
control for family structure in our analyses: whether or not the entrepreneur is living with
a spouse or partner, and if they have children living in their home. An additional personal
network variable controlled for if and when the nascent entrepreneurs indicated they were
a member of a start-up team. We asked respondents if they had received very strong or
strong encouragement from family or friends to start a business, and an additional variable
coded those with many close friends or neighbors who owned their own businesses. We also
measured the extended social capital of individuals in the business community by asking if
they had gotten involved in any business networks, such as trade associations, chambers of
commerce, or service clubs such as the Lions or Rotary. Affirmative responses were coded
in a dummy variable. Note that there may be some level of institutional forces manifesting
themselves in our measures of social capital. Thus, threat of social censure (coercion) has
been cited as one factor that enhances the role of trust exhibited in environments of high
social capital (Coleman, 1990). However, because our unit of analysis is the individual
entrepreneur, and not one specific group or community of associated entrepreneurs, we
believe the role of community coercion is a limited factor in our population.
In many countries, gender has been found to be a significant factor in the probability
of establishing a business (Bates, 1995; Brush & Hisrich, 1991). Age has also been an
associated factoras individuals approach retirement age, they are less likely to invest in
the activities necessary to start a new enterprise (Bates, 1995; Evans & Leighton, 1989).
Other studies have shown age to be positively related to success and start-up rate, although in
a non-linear way (Preisendorfer & Voss, 1990). Human capital consists not only of formal
education, but tacit experience accumulated as life-experience. Older entrepreneurs, by
virtue of their age, will have a higher probability of exposure to institutional phenomenon
than younger entrepreneurs. Thus, demographic variables such as age and gender, as well
as initial educational attainment, are important factors when considering lifelong learning
(Tuijnman & Bostrom, 2002). We thus included gender and age as controls.
We used hierarchical multiple logistic regressions to determine the influence of predictor and control variables on the dichotomous outcomes specified by our hypotheses. This
gave two equations testing the first three hypotheses (Equations 1 and 2 in Table 2), and
an additional two to test the remaining two hypothesis (Equations 3 and 4 in Table 3). We
followed the method developed by Hosmer and Lemeshow (1989) using maximum likelihood estimators to give logistic probabilities, where the computed matrix of covariates and
dependent variables are assigned logistic probabilities.

Results
Table 1 provides descriptive statistics for all variables. The correlation between those
nascents who took a business class and those who wrote a formal plan was .16, not as strong

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

Table 1
Means, standard deviations, and correlations of all variables
Mean

S.D.

12.640 2.634
5.412 6.988

.655

.412

.982

.077

.254

.105

.485

.500

.020

.085

.008

.760
.324

.428
.468

.030
.095

.007
.074

.007
.083

.574
.275

.495
.447

.020
.040

.020
.071

.075
.026

.400

.490

.037

.020

.017

37.897
.289
.748
.567
.404

9.839
.454
.435
.496
.491
.325
.498
.496
.485
.418

10

11

.050
.035
.056
.023
.050

.030
.112
.033
.087

12

13

14

15

16

17

18

19

.010

14.261 10.178 .138

.120
.446
.571
.375
.225

.152
.027
.094
.311
.005
.001

.107
.621
.841
.130
.048
.082
.110 .157
.013
.033
.106
.123
.091
.036
.137 .007
.078
.031
.021
.071
.019
.032
.062
.048
.043

.006
.115

.131

.024
.051

.037
.066

.035
.068

.091

.029

.010

.088

.086

.171

.026
.003
.016
.006
.021

.072
.021
.011
.019
.042

.074
.014
.003
.072
.007

.089
.084
.094
.056
.077

.019
.080
.063
.079
.120

.048
.013
.096
.058
.021
.031
.063
.013
.166 .013
.041
.056
.096
.079
.000
.077
.077
.052
.104 .033
.128
.137
.043
.075
.097

.024
.113
.043
.173
.004
.155
.081
.018
.010
.038

.027
.199
.278
.272
.141

.020
.083
.575
.270
.039

.059
.078
.102

.318
.002

.006
.074
.025
.045
.134 .019
.084
.072
.094
.118 .008
.091
.195 .008
.078

.017
.013
.066
.075
.366
.042
.028
.034 .063
.060
.237

.102
.049
.100
.162 .084
.413
.145 .165 .112 .139

20

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

1. Years education
2. Years
management
experience
3. Years work
experience
4. Previous
start-up
experience
5. Parent in
business
6. Encouragement
7. Friends in
business
8. Team start-up
9. Business
network
10. Known
customer
11. Age
12. Gender
13. Married
14. Children
15. Contact with
agency
16. Manufacturing
17. Business class
18. Profit
19. Survival
20. Formal plan

Correlation is significant at the .05 level (2-tailed).

Correlation is significant at the .01 level (2-tailed).

39

40

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

Table 2
Hierarchical logistic regression, nascent entrepreneurs: most likely to plan
Dependent variable

Years education
Years experience as manager
Years work experience
Previous start-up experience
Parents in business
Encouraged by friends or family
Close friends or neighbors in business
Member of a start-up team
Member of a business network
Knew customer before starting
Age
Gender (f = 1)
Married
Children
Contact with assistance agency
Manufacturing
Business classes taken
2 log likelihood
Model X2
df
Overall hit rate (%)
Cox R2
N

Equation 1

Equation 2

Written formal business

plan (controls only)

Written formal
business plan

.002 (.05)
.001 (.02)
.02 (.02)
.01 (.14)
.34 (.26)
1.07 (.36)
.33 (.28)
.32 (.28)
.79 (.28)
.05 (.26)
.07 (.02)
.20 (.30)
.34 (.34)
.27 (.28)

380.1
36.8
14
79.3
.08
396

.002 (.05)
.007 (.02)
.01 (.02)
.01 (.15)
.36 (.27)
1.06 (.37)
.40 (.29)
.39 (.29)
.60 (.29)
.16 (.27)
.06 (.02)
.25 (.31)
.33 (.36)
.37 (.29)
.99 (.29)
.82 (.38)
.43 (.30)
354.4
62.5
17
80.1
.14
396

Standard errors are in parentheses.

p < .05.
p < .01.
p < .001.

as we anticipated. We also found those individuals who had contact with an assistance
agency were more likely to have completed a business class, with a correlation of .36.
Table 2 shows a hierarchical logistic regression, examining who wrote a formal plan as
the dependent variable.
Equation 1 examines control variables predicting the probability of a nascent entrepreneur
writing a formal written business plan. The goodness of fit chi-square of 36.8 tests the null
hypothesis that the coefficients for all of the terms in this model, except the constant, are
zero (like an f test in regression).
Encouragement by friends and family produced the strongest statistically significant coefficient, 1.07. The logistic regression uses maximum likelihood estimators to calculate the
logit, or log odds of an event occurring. For example, the logit probability (log odds) of
people who have encouragement from friends and family writing a formal business plan is
1.07, and is statistically significant, indicating that generally, individuals with encouragement are more likely to produce plans than those who are not, controlling for the remaining

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

41

variables in the equation. Computing from log odds to probability, more commonly referred
to as odds, is simply a matter of taking the coefficient to the ex , and these probabilities
are calculated and discussed for the readers benefit when relevant, in this section (Hosmer
& Lemeshow, 1989). For the encouragement variable, this means that those individuals
with encouragement were almost three times more likely to have produced a business plan,
than those who did not (1.07ex = 2.91). Our supplemental analysis showed that the Wald
statistic (coefficient/standard error, squared) was quite strong (Hosmer & Lemeshow, 1989).
Those nascents that were members of a business network had increased odds of completing a business plan by twice. Each additional year of the entrepreneurs age increased the
probability of writing a business plan very slightly (1.07).
The first three hypotheses were tested in Equation 2, where contact with agencies, manufacturing firms, and business classes were added to the model. Hypothesis 1 indicated that
nascents having contact with a public assistance agency would be more likely to write a business plan. Hypothesis 2 maintained that manufacturing firms would have a greater propensity
to produce a written formal plan than the referent groups, and Hypothesis 3 predicted that a
business education would exert normative pressure on writing a business plan. The results
show that Hypotheses 1 and 2 were upheld, while 3 was rejected. The model chi-squared
was statistically significant, and the percentage explained (80.1%) slightly greater than the
former model. Because of the additional degree of freedom, the Cox R2 has increased, suggesting that this model is improved. Agency contact was even more influential in producing
a written formal business plan than encouragement from family and friends, increasing the
odds of doing a plan by a factor of 2.69. Thus, Hypothesis 1 was strongly upheld. Manufacturing firms were more likely to produce a written formal business plan than the referent
groups (service, trading, and not stated). The coefficient was significant at the .05 level, increasing the probability of completing a formal written plan by 2.2, upholding Hypothesis
2. Nascents who had a business class did not appear to statistically influence the probability
of writing a formal business plan, although the coefficients are in the anticipated directions.
Hypothesis 3 was thus rejected.
Table 3 shows two logistic regressions for each of the two dependent variablesi.e.,
survival and profitable, respectively.
Equation 3 tested Hypothesis 4, stating that firms with business plans would have a higher
probability of survival, by examining those firms that survived during the 24-month period
of study, as well as those that wrote a formal plan. The model chi-square is statistically
significant, and the Cox R2 shows .19 of explained variance. Writing a formal business
plan had a moderate coefficient increasing survival by 1.8, but failed to pass the p < .05
significance level. Thus, Hypothesis 4 was not supported. Being a member of a business
network was shown to be the strongest control variable in predicting survival, increasing the
probability by a factor of 4.4 (1.50 ex ). Knowing the customer before starting the business
was also a good indicator of survival, increasing the probability by 2.7. Manufacturing firms
increased survival by a factor of 4.0, but this may be on account of the longer development
cycles necessary for manufacturing firms.
Equation 4 tested Hypothesis 5, stating those firms writing business plans would be more
likely to reach profitability, by examining firms reporting profits at any time during the
24-month period of study. The model chi-square is statistically significant, and the variables
have an important influence on profitability, with a Cox R2 explaining .37 of the variance.

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

42

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

Table 3
Hierarchical logistic regression, nascent entrepreneurs: planning and performance
Dependent variable

Years education
Years experience as manager
Years work experience
Previous start-up experience
Parents in business
Encouraged by friends or family
Close friends or neighbors in business
Member of a start-up team
Member of a business network
Knew customer before starting
Age
Gender (f = 1)
Married
Children
Contact with assistance agency
Manufacturing
Business classes taken
Formal Business Plan
2 log likelihood
Model X2
df
Overall hit rate (%)
Cox R2
N

Equation 3

Equation 4

Survival

Profitable

.01 (.05)
.02 (.02)
.01 (.02)
.007 (.13)
.34 (.23)
.11 (.28)
.25 (.26)
.18 (.25)
1.50 (.32)
1.0 (.25)
.04 (.02)
.09 (.26)
.38 (.28)
.49 (.26)
.69 (.27)
1.41 (.50)
.19 (.26)
.59 (.32)
436.15
86.2
18
71.5
.19
396

.01 (.05)
.02 (.02)
.02 (.02)
.28 (.16)
.29 (.27)
.008 (.32)
.64 (.29)
.26 (.30)
1.16 (.33)
3.24 (.34)
.008 (.02)
.64 (.30)
.35 (.33)
.05 (.29)
.17 (.30)
.24 (.45)
.06 (.31)
.19 (.35)
352.1
88
18
80.6
.37
396

Standard errors are in parentheses.

p < .10.
p < .05.
p < .01.
p < .001.

Writing a formal business plan has no statistically significant effects in the equation. Thus,
Hypothesis 5 is rejected. Knowing the customer before starting the business provided the
strongest coefficient in the model, increasing the probability of profitable by 25 (3.24 ex ).
This was followed by being in a business network increasing the probability by 3.1, close
friends or neighbors increasing by 1.8.
Discussion
In this research we examined the commonly accepted practice of writing business plans
from an institutional perspective. Our study shows that new organizations are subject to institutional isomorphic pressures to produce written business plans. We empirically verified
that they conformed to coercive and mimetic isomorphic pressures. Contact with assistance
agencies, where plans were a conditional factor in obtaining governmental monetary assis-

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

43

tance, was used to demonstrate coercive pressures. To demonstrate mimetic processes, we

adopted measures examining specific practices embedded in a particular industry, following
a tradition used in other empirical studies (Burdos, 2001; Mezias, 1990).
We also examined normative force, as studied by Mezias (1990), represented in this
study as having a business education. Our normative measure was not found to significantly
influence the new organizations propensity to write business plans. Contrary to our expectations, nascent entrepreneurs seem to disregard the normative advice provided them
in business classes. Perhaps this is because many business schools are preoccupied with
management in large organizations, and that business educated entrepreneurs recognize that
new organizations require different practices. Alternatively, this may be an artifact of the
type of business education provided in Sweden, or due to the relative newness of Swedish
business education compared to the USA. It may also reflect the market conditions and type
of nascent entrepreneurship existing in Sweden. Future research, using business education
as a proxy for normative pressure, may benefit by devoting more attention to the actual
content of business education.
Surprisingly, our results indicate that performance is not necessarily an outcome of organizational isomorphism. We suspect that new organizations conform to institutional pressures
independently of competitive selection mechanisms. Thus, from an economic efficiency perspective, the writing of business plans in new organizations can be questioned. Our study
also examines isomorphism regarding the survival of nascent activity. We found that those
who wrote business plans were no more likely to persist in nascent activity as compared to
non-planners. This studys failure to find support for Hypothesis 4 at p < .05 is consistent
with Castrogiovannis (1996) contention that planning does not directly effect survival, but
instead influences survival only indirectly through its (direct) symbolism, learning, and efficiency outcomes. Our study suggests that conformity to the business-planning paradigm
is not the result of competitive processes weeding out companies who do not write plans.
Rather, survival seems to be unrelated to business planning.
Previous research examining business plans in new organizations has primarily focused on
the empirical relationship between plans and performance (e.g., Barrow, Barrow & Brown,
1998) and has largely avoided proposing theoretical foundations for such a relationship.
Perhaps as a result, this stream of research has been largely unsuccessful, unable to find
any consistent relationships (Lumpkin, Schrader & Hills, 1998; Rhyne, 1986; Schwenk &
Shraeder, 1993). We found that writing a business plan has no statistically significant effect
on the profitability of the nascent organization, and rejected Hypothesis 5. Because we utilized a theoretical perspective based on institutional theory, we believe we are better able to
explain our findings regarding organizational conformity. It appears that new organizations
do not write business plans to improve performance, rather, they do so in order to conform
to institutionalized rules and to mimic the behavior of others.
In sum, we propose that new organizations plan because they are reacting to how they
are expected to plan, because they imitate other successful organizations in their fields
that plan, or because they are told to plan. This research shares conclusions with several
previous studies examining the spread of management tools and management education,
such as the adoption of the multi-divisional form (Fliegstein, 1985), TQM (Westphal, Gulati
& Shortell, 1997), financial reporting (Mezias, 1990), high-involvement work practices (Pil
& Macduffie, 1996) and entrepreneurship education (Alvarez, 1993).

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

44

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

Of course, this study is not without limitations. Firstly, although we suspect that our
findings might also hold for other environments, we have no way to ascertain this. The
phenomenon of pre-startup business planning is only about a decade old in Sweden, and
many organizations do not formally write business plans. There are reasons to suspect that
the business planning phenomena may be more institutionalized elsewhere, for example
in the USA, where business planning as a concept is older (approximately 50 years cf.
Drucker, 1959). Secondly, while Haverman (1993) suggests that mimetic isomorphism
occurs between successful firms in a similar industry or field, Haunschild (1994) points
out that mimetic isomorphism is moderated by uncertainty. This study was not designed
to capture the role of success for the imitated organization, nor to examine the levels of
uncertainty in the firms environment.
From a cross-cultural perspective, planning may be seen as a way of taming uncertainty,
as well as providing meaning (Brunsson & Olsen, 1993). The need to reduce uncertainty
has been shown to vary culturally (Hofstede, 1980). In terms of Hofstedes (1980) well
known measures of uncertainty avoidance, both Sweden and the USA rate scores well
below the mean (29 in the former, 46 for the latter, mean of 65). Thus, both cultures
appear to have a higher tolerance for unplanned behavior. We suspect that similar outcomes regarding pre-startup planning may be found in the USA and other cultures with
similarly low uncertainty avoidance, despite variations in the diffusion of the paradigm.
Cultures high in uncertainty avoidance, however, may demand more attention to detail,
less flexibility, and so reward the producers of more exacting plans (Andreas, Frese &
Sonnentag, 2000).
This study raises several questions for further study. Future research might devote more
attention to the possible implications of writing a business plan on the actual behavior of the
new organization. For instance, the activity of writing plans may hamper the organizations
ability to act on new opportunities, something often seen as crucial for the success of new
organizations. In general, our findings regarding business plans and performance suggest
that if any relationships exist, they are either weak or more complicated than the business
planning literature implies (e.g., Boyd, 1991; Robinson, Logan & Salem, 1986). Economic
outcomes may be contingent upon the level of uncertainty the nascent organization experiences (McGrath & MacMillan, 1995), or perhaps the complexity involved in the market
or product technology employed. We encourage further study to test other explanations
regarding the relationship between planning and profitability and survivability of nascent
organizations.
Lastly, we remain particularly interested in the role of assistance agencies. In our analyses
we found that contact with assistance agencies was positively correlated with writing formal
plans, while unrelated to profitability, suggesting that assistance may be influencing nascent
organizations in non-helpful ways. The relationship between planning and survival may be
another fruitful subject for future research. Note, that survival is not necessarily a socially
positive outcome. If the idea to start a business does not have sufficient merit, it may
be a more beneficial outcome for the economy, the community, and for the entrepreneur to
terminate at an earlier date. While this study examines the antecedents and effects of writing
a business plan, we encourage future research that addresses more fine-grained definitions
of plans and planning. Do certain types of planning activities outperform others? What role
do related topics play, such as financial planning, unwritten, or informal plans, in nascent

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

45

organizational development and performance? Is there an optimum time in the life-cycle of

a firm to write a business plan? Careful longitudinal research is necessary to answer these
questions, critical to a range of actors, including scholars, teachers, and agents attempting
to promote entrepreneurship.

Acknowledgments
We are indebted to The Entrepreneurial Research Consortium (ERC), a temporary association of 30+ university centers and 100+ scholars who are carrying out the U.S. Panel
Study of Entrepreneurial Dynamics (PSED). This Swedish study has been made possible
through financing from the Swedish Foundation for Small Business Research, the Knut
and Alice Wallenbergs Foundation, and the Swedish National Board for Industrial and
Technical Development (NUTEK). We also thank our three anonymous reviewers for the
extensive and unprecedented assistance in developing this manuscript.

References
Abrahamson, E. 1991. Managerial fads and fashions: The diffusion and rejection of innovations. Academy of
Management Review, 16: 586612.
Aldrich, H., & Fiol, M. 1994. Fools rush in? The institutional context of industry creation. Academy of Management
Review, 19: 645670.
Alvarez, J. 1993. The diffusion and institutionalization of entrepreneurship education in the eighties. In S. Birley,
I. MacMillan, & S. Subaramony (Eds.), Entrepreneurship research: Global perspectives: 325. Amsterdam:
Elsevier Science Publishers.
Ames, C. B. 1989. How to devise a winning business plan. The Journal of Business Strategy, 10: 3036.
Andreas, R., Frese, M., & Sonnentag, S. 2000. Cultural differences in planning/success relationships: A comparison
of small enterprises in Ireland, West Germany, and East Germany. Journal of Small Business Management,
38(4): 2841.
Baron, J. P., Dobbin, F., & Jennings, P. D. 1986. War and peace: The evolution of modern personnel administration
in U.S. industry. American Journal of Sociology, 92: 250283.
Barrow, C., Barrow, P., & Brown, R. 1999. The business plan workbook. International Small Business Journal,
18(1): 114117.
Bates, T. 1995. Self-employment entry across industry groups. Journal of Business Venturing, 10: 143156.
Becker, G. S. 1964. Human capital. Chicago: The University of Chicago Press.
Bourdieu, P. 1983. Forms of capital. In J. Richardson (Ed.), Handbook of theory and research for the sociology of
education: 241258. New York: Greenwood Press.
Boyd, B. K. 1991. Strategic planning and financial performance: A meta-analytic review. Journal of Management
Studies, 28: 353374.
Bracker, J., Keats, B., & Pearson, J. 1998. Planning and financial performance among small firms in a growth
industry. Strategic Management Journal, 19: 591603.
Brown, S. 1998. Manufacturing strategy, manufacturing seniority and plant performance in quality. International
Journal of Operations and Production Management, 18: 565587.
Brunsson, N., & Olsen, J. 1993. The reforming organization. London: Routledge.
Brush, C., & Hisrich, R. 1991. Antecedent influences on women-owned businesses. Journal of Management
Psychology, 6: 916.
Burdos, A. 2001. An institutional theory of organizational retrenchment: Adoption of early faculty retirement
programs among Ontario universities. Canadian Journal of Administrative Sciences, 18: 221236.

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

46

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

Carter, N., Gartner, W., & Reynolds, P. 1996. Exploring start-up event sequences. Journal of Business Venturing,
11: 151166.
Castrogiovanni, G. 1996. Pre-startup planning and the survival of new small businesses: Theoretical linkages.
Journal of Management, 22: 801822.
Coleman, J. 1988. Social capital in the creation of human capital. American Journal of Sociology, 94: 95120.
Coleman, J. 1990. Foundations of social theory. Cambridge: Belknap Press.
Cooper, A., & Dunkelberg, W. 1986. Entrepreneurship and paths to business ownership. Strategic Management
Journal, 7: 5368.
Dacin, T. 1997. Isomorphism in context: The power and prescription of institutional norms. Academy of
Management Journal, 40: 4681.
DiMaggio, P., & Powell, W. 1983. The iron cage revisited: Institutional isomorphism and collective rationality in
organizational fields. American Sociological Review, 48: 147160.
Drucker, P. 1959. Long-range planning challenge to management science. Journal of the Institute of Management
Sciences, 3: 238249.
Evans, D., & Leighton, L. 1989. Some empirical aspects of entrepreneurship. The American Economic Review,
79: 519535.
Fliegstein, N. 1985. The spread of the multidivisional form among large firms, 19191979. American Sociological
Review, 50: 377391.
Fry, F. L., & Stoner, C. R. 1985. Business plans: Two major types. Journal of Small Business Management, 23:
16.
Greenwood, R., & Hinings, C. R. 1996. Understanding radical organizational change: Bringing together the old
and the new institutionalism. Academy of Management Review, 21: 10221054.
Haunschild, P. 1994. How much is that company worth? Interorganizational relationships, uncertainty, and
acquisition premiums. Administrative Science Quarterly, 44: 391411.
Haverman, H. A. 1993. Follow the leader: Mimetic isomorphism and entry into new markets. Administrative
Science Quarterly, 38: 593.
Hindle, K. 1997. An enhanced paradigm of entrepreneurial business planning. Unpublished doctoral dissertation,
Swinburne University of Technology, Australia.
Hisrich, R. D., & Peters, M. P. 1989. Entrepreneurship: Starting, developing, and managing a new Enterprise.
Homewood: Irwin.
Hofstede, G. 1980. Cultures consequences: International differences in work related values. Beverly Hills, CA:
Sage.
Honig, B. 1998. Who gets the goodies? An examination of microenterprise credit in Jamaica. Entrepreneurship
and Regional Development, 10: 313334.
Honig, B. 2001. Human capital and structural upheaval: A study of manufacturing firms in the West Bank. Journal
of Business Venturing, 16: 575594.
Hosmer, D., & Lemeshow, S. 1989. Applied logistic regression. New York: John Wiley & Sons.
Jones, C. 2001. Co-evolution of entrepreneurial careers, institutional rules and competitive dynamics in American
film, 18951920. Organizational Studies, 22: 911944.
Kahrs, K. 1995. Business plans handbook. Detroit: International Thomson Publishing Company.
Karnoe, P. 1995. Institutional interpretations and explanations of differences in American and Danish approaches
to innovation. Thousand Oaks: Sage.
Katz, J., & Gartner, W. 1988. Properties of emerging organizations. Academy of Management Review, 13: 429
441.
Lampel, J., & Shamsie, J. 2000. Critical push: Strategies for creating momentum in the motion picture industry.
Journal of Management, 26: 233257.
Lin, N., Ensel, W., & Vaughn, J. 1981. Social resources and strength of ties: Structural factors in occupational
status attainment. American Sociological Review, 46: 393405.
Loury, G. 1987. Why should we care about group inequality? Social Philosophy and Policy, 5: 249271.
Lumpkin, G., Shrader, R., & Hills, G. 1998. Does formal business planning enhance the performance of new
ventures? In W. Reynolds, N. S. Carter, C. Mason, G. Meyer, & K. Shaver (Eds.), Frontiers of entrepreneurship
research: 180189. Wellesley, MA: Babson College.
Maitland, I. 1996. Successful business plans in a week. Oxon, UK: Hodder & Stoughton.

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

47

McDermott, S. F., Vecchi, J., & McKenna, J. 1986. The start-up venture-phase I: Business plan development.
Massachusetts CPA Review 60: 613.
McGrath, R. G., & MacMillan, I. C. 1995. Discovery driven planning. Harvard Business Review, 73(4): 412.
McKenna, J. F., & Oritt, P. L. 1981. Growth planning for small business. American Journal of Small Business,
5(4): 1929.
Meyer, J., Ramirez, F., & Soysal, Y. 1992. World expansion of mass education, 18701980. Sociology of Education,
64: 128149.
Meyer, J., & Rowan, B. 1977. Institutionalized organizations: Formal structure as myth and ceremony. American
Journal of Sociology, 83: 340363.
Mezias, S. J. 1990. An institutional model of organizational practice: Financial reporting at the Fortune 200.
Administrative Science Quarterly, 35: 431457.
Mezias, S. J., & Scarselletta, M. 1994. Resolving financial reporting problems: An institutional analysis of process.
Administrative Science Quarterly, 39: 654678.
Mizruchi, M. S., & Fein, L. C. 1999. The social construction of organizational knowledge: A study of the uses of
coercive, mimetic and normative isomorphism. Administrative Science Quarterly, 44: 653683.
Oliver, C. 1991. Strategic responses to institutional processes. Academy of Management Review, 16: 145179.
Parsons, T. 1956. Suggestions for a sociological approach to the theory of organizations, I and II. Administrative
Science Quarterly, 6385: 225239.
Pil, F., & Macduffie, P. 1996. The adoption of high-involvement work practices. Industrial Relations, 35: 423455.
Portes, A. 1998. Social capital. Annual Review of Sociology, 23: 124.
Preisendorfer, P., & Voss, T. 1990. Organizational mortality of small firms: The effects of entrepreneurial age and
human capital. Organization Studies, 11: 107129.
Reynolds, P. 1997. Who starts firms? Preliminary explorations of firms in gestation. Small Business Economics,
9: 449462.
Rhyne, L. 1986. The relationship of strategic planning to financial performance. Strategic Management Journal,
7: 423436.
Robinson, R., & Pearce, J. 1983. The impact of formalized strategic planning on financial performance in small
organizations. Strategic Management Journal, 4: 197207.
Robinson, R. B., Logan, J. E., & Salem, M. Y. 1986. Strategic versus operational planning in small retail firms.
American Journal of Small Business, 10(3): 716.
Schultz, T. 1959. Investment in man: An economists view. The Social Service Review, 33: 6975.
Schwenk, C. R., & Shraeder, C. B. 1993. Effects of formal strategic planning on financial performance in small
firms: A meta analysis. Entrepreneurship Theory and Practice, 17(3): 5362.
Scott, W. R. 2000. Institutions and organizations. Thousand Oaks: Sage.
Slack, T., & Hinings, B. 1994. Institutional pressures and isomorphic change: An empirical test. Organizational
Studies, 15: 803827.
Stinchcombe, A. L. 1970. Social structure and organizations. In J. G. March (Ed.), Handbook of organizations.
Stanford: Rand McNally & Company.
Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management
Review, 20: 571610.
Svelby, K. E. 1997. The new organizational wealth: Managing and measuring knowledge-based assets. San
Francisco: Berrett-Koehler.
Timmons, J. A. 1980. A business plan is more than a financing device. Harvard Business Review, 58(2): 2834.
Tuijnman, A., & Bostrom, A. 2002. Changing notions of lifelong education and lifelong learning. International
Review of Education, 48: 93110.
Westphal, J. D., Gulati, R., & Shortell, S. M. 1997. Customization or conformity? An institutional and network
perspective on the content and consequences of TQM adoption. Administrative Science Quarterly, 42: 366394.

BensonHonig: Graduate School of Business, University of Haifa. Ph.D. (Stanford University). Benson Honig has studied microenterprise and entrepreneurship worldwide. Current
research interests include business planning, nascent entrepreneurship, social capital, and
entrepreneurship in environments of transition. Previous work appears primarily in leading
journals in the entrepreneurship field.

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009

48

B. Honig, T. Karlsson / Journal of Management 2004 30(1) 2948

TomasKarlsson: Ph.D. candidate, Jnkping International Business School (JIBS). Tomas

Karlsson finished his masters degree in business and administration 1998. During 1999 he
was involved in the Program on Entrepreneurship and Growth (PEG), mainly responsible
for qualitative data gathering. Currently a doctoral student at JIBS, his primary interests
include research methodology, business planning in new organizations and opportunity
development processes in high growth ventures.

Downloaded from http://jom.sagepub.com at SAGE Publications on April 29, 2009