Institutional forces and the written business plan: the case of technology entrepreneurs in South Africa

Heslop, Richard

Institutional forces and the written business plan: the case of technology entrepreneurs in South Africa

Master Thesis

2016

Publisher

University of Cape Town

Department

Department of Information Systems

Faculty

Faculty of Commerce

Abstract

For the rational entrepreneur, the investment in the creation of a business plan should lead to some economic advantage in terms of measurable business value. Conversely, the absence of a business plan should lead to poor performance of the young enterprise. Given the ubiquity of business plans, the de facto accepted hypothesis holds that among a sample of entrepreneurs, those with business plans should outperform (e.g. survival, profit, sales, growth etc.) those without. In this study, a systematic 10-year literature review was conducted to assess the state of the empirical body of knowledge with regard to the entrepreneur's business plan. This review finds that empirical attempts to confirm the assumed relational causality in the direction from business planning to new venture performance have yielded findings that are mixed, contradictory, and inconclusive. In the absence of clear evidence to support arguments of economic rationale, researchers have argued the importance of testing alternative rationale to explain the ubiquity of the business plan. In this study, the theory of institutionalisation was tested as an alternative to economic rationale in predicting the likelihood of an entrepreneur developing a formal business plan. The specific setting for the research was South African information technology start-ups. A questionnaire was developed deriving constructs from prior studies in the domain. Entrepreneurs were approached directly, as well as through organisational stakeholders in the South African technology entrepreneurship environment. Respondents completed an online questionnaire, yielding a final sample of 80 valid responses. The profile of respondents was found to be generally consistent with other probabilistically-sampled studies in the population. Corresponding with the three institutional pressures, three hypotheses were tested. Support was found for coercive pressure originating from providers of finance. The study did not find support for the hypothesised mimetic behaviour among technology entrepreneurs (mimetic force), nor for the normative force hypothesised as resulting from a tertiary-level business education. Statistical regression analysis suggested that a range of wider factors appears to be influencing the South African technology entrepreneur's decision to write a business plan. This findings of this research offer practical implications for entrepreneurs, educators, providers of finance, and entrepreneurship researchers.

Keywords

Information Systems

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