Governmental, non-governmental (NGO’s) and educational institutions continue to dedicate considerable efforts towards the promotion and training of business planning activities for entrepreneurship. Surprisingly, the importance of business plans by entrepreneurs has limited empirical support. We compare and test instrumental and institutional theories to explain the widespread prevalence of the business plan dogma. A quantitative/qualitative research blend was used to compare and test the two theories. Instrumental explanations to the widespread prevalence were rejected in the quantitative study, while the institutional explanations were supported in both the quantitative and qualitative study. Instructors intent on utilizing the business plan dogma might stress pedagogical benefits rather than instrumental. This research suggests that lecturers would be better advised to focus on factors more important to nascent firms, such as social structure and networks.

In the field of entrepreneurship, institutions have discontinued attempts to teach students how to “become” entrepreneurs, focusing instead on providing skills and training that might be useful to those individuals already embodying entrepreneurial talent, however it be defined (Vesper 1982). The business plan has become one central focal point for such activities. Despite the avowed importance of business plans and business planning to entrepreneurship and business education, the topic itself is not well understood (Mintzberg 1994). Even so, considerable resources continue to be expended on the promotion of business plans, training in writing business plans, various competitions, and their presentation and analysis.

Empirical evidence examining the effectiveness of business planning has been limited, and often provides conflicting information (Ven de Ven 1980). Some studies have found that planning assists with the growth and success of new firms (Bracker, Keats & Pearson 1998; Schwenk & Shrader 1993), while others have failed to find any association (Robinson & Pearce 1983; Boyd B.K. 1991). One study reported that less than half of all entrepreneurs of small high growth businesses completed business plans, and that the majority did so only for reasons related to external funding (Shuman, Shaw & Sussman 1985).

In particular, we know little of the importance of business plans during emergent stages of organizational formation. Much of our existing knowledge is based upon asking entrepreneurs who have started businesses to rate the importance of the business plan document. Despite making an important contribution to the study of entrepreneurship, this type of research suffers from two major flaws. First of all, there is a success bias, in that information is gathered primarily from those who have experienced a successful endeavour. In such outcome oriented entrepreneurial research, the sampled population has already launched a business by becoming a recognized and visible organizational entity, thus excluding the study of ongoing attempts or failed activities. Secondly, evaluation research of this type fails to follow the entrepreneurial processes from the earliest stages, in real time. As a result, serious limitations and potential errors are introduced caused by hindsight bias and memory decay.

A widely accepted assumption regarding business plans is based on a 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 either through efficiency gains or resulting from greater sales. The apparent success of the business plan dogma can be seen as proof that most firms receive considerable value from producing business plans. Business plans help firms to collect, coordinate, and control business activities. In addition, business plans may improve the engagement of the entrepreneur.

Plans are said to provide a systematic way of collecting information about the firm’s present state and the future implications of present decisions (Loasby, 1967:301 in Mintzberg, 1994). Simply put, plans help firms to consider the future, thereby reducing uncertainty. For example, if a firm has a competent forecast of their sales for the following year they can set up an efficient production system. If one firm plans and their competitors do not, planners will have reduced production costs and hence have a cost advantage compared to other firms.

Gains may occur through an explicit process of the formulation strategy, to insure that functional departments are coordinated and directed towards some common goal (Porter, 1980:xii, in Mintzberg 1994). Business plans can be seen as a way of insuring that sales people do not sell what the production personnel cannot produce. Articulate plans improve firm coordination, ensuring that unnecessary work is reduced. For example, a more effective routine developed in one department can be transferred to another department.

Plans may improve the firm’s control over idiosyncratic human behaviour. For example, a production system can rely on very timely deliveries of goods. Plans can also formalize strategy making including the planners themselves. As with the production worker; unplanned behaviour can create similar efficiency losses in the strategy making process. (Mintzberg 1994)

Some scholars maintain that plans have a value in themselves, because the planning activity that produces the plan simultaneously enhances communication within the organization (Hax and Majluf, 1984:66 in Mintzberg 1994). In a similar manner, individual engagement in projects and the self-image of the businessman can also be strengthened by doing a business plan (Cialdini, 1988). The existence of a plan may increase the effort an employee or a business owner invests in the firm, and therefore improves the results.

We have identified four major instrumental arguments in favour of doing business plans. Following this discussion two central hypotheses are constructed:

Hypothesis 1: Planning improves a firms production capability, due to the improved collection, coordination, control and engagement. Nascent firms that do business plans outperform those that do not in terms of the probability of having a first sale.

Hypothesis 2: Planning improves a nascent firm’s results, due to the improved collection, coordination, control and engagement. Nascents that do business plans outperform those that do not in terms of their probability of becoming profitable.

One useful theoretical perspective in analysing possible non-rational causes of business plans is an institutional approach. Many activities that are considered normative practices today have “rational” foundations that are no longer relevant, but persist in any case (Meyer & Rowan 1977). Institutional theory focuses on the normative isomorphic forces that represent the customary and professionally accepted activities deemed socially responsible. Unique combinations of agents and environments may result in practices and innovations that diffuse despite inefficiencies, business planning may be just such a practice. Thus, diffusion occurs in reaction to political or other isomorphic forces (Abrahamson, 1991).

Writing a business plan provides legitimacy, signals professionalism and indicates that the person(s) involved are “serious” to the outside world. From this perspective, a business plan will not result in successful outcomes such as increased profitability, better management, or more competitive firms. Completing a business plan may result in greater longevity, as normative professional activity is more likely to be sustained, even in the event of economic loss, than uncharacteristic activity. Nascent activities that survive longer may do so only because producing business plans provides the illusion of normality by signalling legitimacy to the outside world, that provides resources. Thus, institutional theory provides a counter instrumental explanation regarding why individuals who otherwise fail to obtain benefits engage in business planning activity. We have three hypotheses to examine this perspective:

Hypothesis 3: Producing business plans will have no effect on the probability of nascent firms concluding a first sale.

Hypothesis 4: Producing business plans will have no effect on the probability of nascent firms becoming profitable.

Hypothesis 5: Producing business plans will increase the probability of nascent firms persistence.

This study utilized a quantitative/qualitative research blend in identifying the importance of business planning to the nascent firm. We started with a quantitative study, to determine the overall relationship between business plans and performance. This allowed us to maximize the impact of a very large sample frame regarding the broad macro characteristics of nascent planning. The qualitative research was conducted to facilitate the interpretation of the lack of relationship between business plans and performance. Quantitative research readily allows the researcher to establish relationships among variables, but is often weak when it comes to exploring the reasons for such relationships. A qualitative study can be used to help explain the factors underlying the broad relationships (or lack there of) that are established. (Punch, 1998). We considered the quantitative analysis insufficient to fully understand and explain the relationship between business plans and performance in the nascent firm. Specifically, the institutional forces compelling firms to do business plans were considered to be better understood utilizing a qualitative approach. A subsequent qualitative study was therefore designed. This assisted to improve our understanding of the underlying determinants of nascent business planning, enriching our interpretations of the results found in the quantitative study. Sampling techniques, measures, models and coding principles are submitted in the Appendix due to the limitations of space.

Table 1 presents a summary of the means standard deviations, and T Tests for two groups, nascent firms and nascents who were profitable sometime during the 24-month study. The average age for a nascent firm was 37, and had 14 years of work experience. 28% of the sample was female, 74% were married, and 56% had children. 41% had some previous start-up experience. 72% of all the nascents completed some sort of business plan, and a slightly higher 76% of the profitable group did so. The incidence of written business plans was much lower—31% of each group wrote an informal plan for internal use, and 22% of the nascents, 26% of the profitable nascents wrote a formal business plan for external use. While 63% of nascents did a financial plan, 72% of the profitable ones did so. Those who did not do a business plan were asked if they had the knowledge to do so—59% indicated that they did, in fact, have the knowledge necessary.

We asked nascents if they believed producing a business plan made it easier to start their business, and 63% indicated that this was the case, while 38% indicated that doing a business plan led to higher sales. Only 40% of the respondents indicated they had changed the business plan once it was completed.

Business classes and contact with assistance agencies were found to be quite common among the group. 44% had taken a business class and 40% had contact with a business assistance agency. T-tests indicated that the group of profitable nascents were more likely to have taken a business class (T = 2.03).

Table 2 shows four logistic regressions, equations 1–4, examining writing a formal business plan, a first sale, profitability, and abandoning the activity, as dependent variables. Equation 1 utilized as a dependent variable those businesses that reported having a first sale at any time during the first 24 months. Hypothesis 1 predicted that producing a business plan would increase the probability of having a first sale. Neither a written formal, nor a written informal business plan demonstrated statistically significant results in the equation. H1 was rejected, while H3, which predicted no relationship, was upheld. Unlike general business plans, having produced a financial plan was a reasonably strong indicator of having a first sale, with coefficient of .768, doubling the odds of a first sale. Note that 63% of all nascents did some sort of financial plan, while only 22% wrote a formal business plan, and another 31% an informally written plan. 19% of those that claimed to do a business plan had not completed an informal or formal written plan, but indicated they had done a plan none the less (this may have been informal planning that did not include a written or formally written component). Thus, the financial plans and the business plans are discreet activities, and were not highly correlated. Being a member of a business network was the strongest statistically significant variable in the equation, increasing the odds of having a first sale by 2.6. This was followed by having close friends and neighbours in business and of having done a financial plan.

Equation 2 studied those businesses that reported to be profitable as a dependent variable during any of the six-month survey waves in the study. 29% of the firms reported profits during one or more six-month periods. Those nascents who knew who their customer was before starting their business was the most likely to be profitable, with a coefficient of 3.3 increasing the odds of profitability by 27. Being a member of a business network also increased the probability of reporting a profit, by 3.2. Those nascents who completed a financial plan were more likely to be profitable, with the coefficient of .899 increasing the odds by 2.4. Surprisingly, women were slightly more likely to report a profitable business than men. Finally, those with close friends in business were also more likely to be profitable, where the coefficient of .579 increased the odds by 1.7. Hypothesis 2 predicted that producing a business plan would increase the probability of becoming profitable. Neither of the business planning activities, formal written or informally written, were statistically significant in increasing the odds of profitability, and the signs of the coefficients were actually negative. Thus, H2 was rejected and H4, which predicted no relationship, was upheld.

Equation 3 examines firm failure as a corollary to profitability. Both being in a business network and knowing customers before starting the business were inversely related to business failure. Interestingly, having contact with an assistance agency increased the probability of failure, with a coefficient of .718 doubling the odds of failure. Hypothesis 5 predicted that having produced a business plan would increase the probability of persistence. We found a small negative yet statistically significant relationship between those that completed a business plan and persistence, as defined as the opposite of abandonment, and H5 is not rejected. Producing a financial plan was also negatively related, increasing the odds of not being in the abandoned state by 1.6. H3 was rejected, but only weakly.

The section provides an illustration of specific isomorphic tendencies that we uncovered in the interviews. Respondents agreed to participate in the paper with full identification. However, we still decided to replace their names with aliases for ethical reasons.

There are a number of indications of coercive pressures regarding the use of business plans in our qualitative study. The Swedish unemployment office has a policy, providing firm owners with a $1000 grant when they start their own business, if they participate in a “start their own firm” course. Because the course is outsourced, the unemployment office has little ongoing knowledge of the contents and activities that transpire. Our respondents indicated that a major theme in their course was to write a business plan. “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.” (Eva 2000-10-20). Eva’s comment is actually a slight miss-interpretation. In actuality, the policy of the unemployment office is that they have to present their business idea to an external consultant who evaluates the idea. The external consultant however, may have as a policy that requires all funded firms to do business plans. In this case, we coded the pressure as coercive, as her perception towards the “start a new business” fund was that it was strongly coercive. Similarly, Tina had similar demands from a different source. She had a board of external mentors, one of which whom demanded that she write a very specific business plan. “He demanded me to rewrite my business plan cause according to him, mine was not one [a business plan].” (Tina 2000-11-24). The strongest illustration of coercive isomorphic pressures came from Kalle who discussed a business plan he wrote when he applied for a start up grant for a previous venture of his. When he was asked, why he did a business plan for that venture, he answered. “Cause you had to, that’s the only reason. I believe that you have got your idea in your head and you know what you are supposed to do, and that is kind of hard putting to words on a paper. Above all when you’re just supposed to hand it into some one just for the sake of it. And I guess I experienced it as if they just HAD to have a business plan, a bureaucratic thing.” (Kalle 2000-12-08). We view these statements as a strong indication that entrepreneurs perceive strong coercive isomorphic pressures on nascent firms to do business plans. All in all, we have found illustrations of strong perceived coercive pressures among our sample of nascent firms.

Traces of mimetic isomorphism were found in one of our cases. Tina discusses writing a business plan in terms of mimicry. She had experience in a firm, where the business plan was used as a tool for organizational renewal. “Our owner asked us, how are we going to grow, how are we going to earn more money? I think it was then we began to use our business plan.” (Tina 2000-11-24). Tina clearly modelled her own business plan after this firm. The positive usage of business plan in the old firm made Tina believe that was a sensible to do so for her own firm. What the business plan eventually looked like did not appear to matter to Tina. “I don’t know if my business plan is how a business plan should be. I never even thought about what a business plan is supposed to be. I don’t give a damn, really, as long as it works for me.” (Tina 2000-11-24). Because we found traces of mimetic isomorphism only in this one case we suspect that mimetic isomorphism is not as important when it comes to business plans and nascent firms, as the other isomorphic pressures. However, it is also possible that the vague trace of mimetic isomorphism is an artefact of our method.¹

The normative influences were captured indirectly through indications of e.g. management platitudes. We have several indications of such platitudes. Eva suggests that business plans are something needed to get access to various types of financing. “When you are searching financing, it [the business plan] is very important, if you have someone outside the firm that is going to contribute with money.” (Eva 2000-10-20). She also suspected that her business school education clearly advocated and directed the production of a business plan. “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].” (Eva 2000-10-20). There was surprising agreement regarding normative pressures among the respondents: “Of course, you have to have everything on paper, to know what you should do. When you bake a cake, you always have to have the recipe first. You cannot just mix things together and believe that everything works out. It is not possible, the business plan is the recipe, and it is the company.” (Elsa 2000-10-17). Elsa stated this even though she indicated that she had not written a business plan, in fact, she had never actually seen one.

The qualitative study shows that there are strong normative and coercive pressures to produce business plans, lending further support to our quantitative findings. Business plans appear to be done primarily for institutional rather than instrumental reasons. Even actors that do not do business plans are aware of these pressures and give clear indications of being influenced by them. There is also a strong coercive pressure from the Swedish unemployment office. The unemployment office supports firm start-ups if they have good business ideas. In practice, good ideas are often evaluated by the amount of work that has been put into the business plan, by how credible it looks. There seems to be an especially strong opinion that one is coerced into doing business plans when nascent firms meet to arrange their finance. Discussions with local bank officers confirm this assumption. The most important variable for giving credit to new firms is the financial position of the nascent business owner. Start-ups with business plans seem to have better access to financial backing from the unemployment office and from local banks, thus, start-ups with business plans are more likely to start. We also found some illustration of mimetic isomorphism. We therefore support the notion that business plans are a subject to institutional isomorphism. By the relative ease to find illustrative examples, and the high levels of taken-for-grantedness among the respondents, we suspect that the institutional isomorphism when it comes to business plans is strong.

We placed the business plan dogma under empirical analysis, comparing and contrasting instrumental and institutional theories. Using both quantitative and qualitative methodologies, our results indicated that business plans provide legitimacy and signal reputational conformity, but do not add any measure of consistent advantage or efficiency in the actual process of organizational evolution. In the quantitative study, nascent firms who completed formally written business plans, as well as those completing informally written business plans, were found not to be more profitable, not to be more likely to have a first sale. Hence, hypotheses 1 and 2, —both testing the instrumental reasons to do business plans—were rejected in the quantitative study. We also tested our hypotheses regarding institutional theory (3–5) and these were supported. Our qualitative study, further supports this notion. The qualitative study found several illustrations of institutional isomorphism (DiMaggio and Powell, 1983). In fact, illustrations of coercive, mimetic and normative isomorphism were all found.

Both the qualitative study and the quantitative study support the notion that firms do business plans for institutional reasons rather than for instrumental reasons. We therefore assert that institutional theory provides a strong framework to illustrate why nascent firms do business plans.

The public policy implications of this research are considerable. If business planning is primarily a symbolic activity, quality may not be a critical factor in determining future success. Agencies, professors, and business schools may want to reconsider how they promote and assist entrepreneurship, focusing on analysis rather that on planning. Banks may need to question their policies to demand business plans. This research suggests the need for a comprehensive re-evaluation of the curriculum labelled “entrepreneurship.” Based on evidence from this research, governments and public policy actors’ intent on utilizing the business-planning dogma should stress that the exercise is intended for pedagogical reasons, not for actual implementation. Producing a business plan may help individuals recognize the breadth and complexity of starting a new business. Having them undergo the task may be more helpful in weeding out those who lack sufficient motivation, understanding, or resources, than in assisting those who plan to start businesses regardless.

1. Mimetic is perhaps the most difficult type of isomorphism to find with interviews. As interviews are self-reflection, from the perspective of the respondent, it means that the respondent must be aware of, or illustrate something that good, so it becomes possible for the researcher to deduct reasonable meaning. Mimetic influences, are less salient than coercive, and less deductible than normative pressures. They are harder to be aware of, and less easy to deduct as a researcher. Therefore may there be more difficult to find in interviews.

CONTACT: Tomas Karlsson, Jönköping International Business School, Box 1026, 551 11 Jönköping, Sweden; +46736424064; 4636161069; kato@ihh.hj.se

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THE QUANTITATIVE STUDY

Sample

The study was 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. 49,979 individuals was randomly selected, it was possible to obtain a telephone number for 35,971 (71.9%) of the individuals. The remaining 28.1% were not listed (n = 13 338), had severe disabilities (n = 381) or had moved abroad (n = 289). Of those contacted by telephone, 30,427 individuals (84.6 %) agreed to participate. Out of these, 961 respondents qualified for the longer interview by answering in the screening interview that they were starting a business either independently (nascent firm) or as part of a current job assignment (nascent intrapreneur). From those who qualified for the longer interview, a final sample of 396 verified and accessible nascent firms were identified.

Quantitative Measures

Dependent Variables: Our initial model examines elements that might lead nascent firms to produce a formal written business plan, such as formal education, business education, or contact with governmental assistance agencies. Next, we examine three different dependent variables in order to examine whether or not business planning for nascent firms is associated with first sale, profitability, or abandonment. The first dependent variable is a dummy variable indicating if any sales occurred at each successive interview wave. A first sales represents an evident instrumental indication of a nascent firm’s eventual emergence. A second dependent variable identified those firms whose owners indicated that they were profitable at the time of survey , at either the 6,12,or 18 or 24-month intervals. As profitability is both nominally essential and a primary goal of SME’s, we consider this to be a particularly good indicator of successful nascent activity. The third dependent variable was project termination.

Human capital of the nascent firm owners was determined by a number of methods. Owners were asked to indicate the highest level of education they had completed. The category, ranging from primary to doctorate, was coded into number of years. Respondents were also asked their total years of full time paid work experience in any field, to provide the experience variable. Respondents were also asked how many years of supervisory or managerial experience they had. Years of experience and years of management experience were also squared and added to the equations to examine non-linear effects. Since none were found, they were subsequently left out of the analysis. Much attention has focused on the specific training needs of nascent firms. Classes are typically available providing a wide range of information, including legal, procedural, marketing, and strategic aspects of starting a new business. We asked respondents if they had ever attended any classes or workshops on starting a business. Because we had no way of evaluating or comparing the different quality or range of course content, a dummy variable was created to indicate if they had ever attended a business course. One additional count was added for each of two classes, three classes, and four or more classes. Individuals who had previously attempted a start-up were also noted, indicated by a dummy variable.

Social capital was determined utilizing a number of variables representing both individual (parental network, family network), and organizational (business community networks). The majority of variables were designed to examine individual networks. For example, parental networks were coded from if either parent had ever owned a business before. As discussed in the theory section, this variable has been shown to be influential in a number of studies of entrepreneurship. We use it to indicate evidence of personal business networks and relationships facilitated. A variable was also constructed for those individuals who indicated that their family, relatives, and close friends were encouraging of their starting a business. As previously discussed, the family is a primary source of social organization, and has been shown to influence the probability of self-employment (Sanders & Nee 1996). We include two factors that examine family structure in our analysis: 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 was to examine if and when the nascent firms indicated they were members of a start-up team. We also wanted to examine the effects for the strength of personal networks, as reported by the nascent firms. For this, we asked them if they had received very strong or strong encouragement from family or friends to start a business, or had most or many close friends or neighbours who owned their own businesses.

Two sets of questions examined the extended social capital of individuals in the business community. The first asked them 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 1 in a dummy variable. The second set of questions explored their specific contacts with organizations that dispense business advice assistance in Sweden.

In most countries, gender has been found to be a significant factor in the probability of establishing a business. Age has also been an associated factor—as individuals approach retirement age, they are less likely to invest in the activities necessary to start a new enterprise.

Model Specification

The model constructed was a binomial logistic regression, analyzing individuals within the nascent group who had completed one of the two specific nascent steps studied (first sale and profitability), against those who did not, as a dependent variables. The logistic regression tests the probability of an event happening, in this case, either engaging in a nascent activity having a sale, or becoming profitable, for a dichotomous dependent variable. The predicted proportion of activities follows the logistic model of LN P/(1 – Pi) = ßXi, where Pi is the probability of either being a nascent firm, or of a nascent firm creating a business plan, registering the business, or obtaining the first sale (Hosmer & Lemeshow 1989). The logarithmic odds of these events are held to be linearly affected by a vector of covariates Xi with coefficient vector ß. A one-unit change in covariate j alters the probability that an individual will engage in one of the dependent variables by ß jPi(1-Pi). We used the SPSS statistical package to estimate the logistic probabilities.

Logistic probabilities are given by maximum likelihood estimators and are provided for each group, those who had a first sale, or achieved profitability, and those who did not. Each cell of the matrix of covariates and dependent variables is assigned a logistic probability. The null hypothesis is that the difference between observed and predicted outcomes (maximum likelihood estimates) in each cell of the logit table has occurred by chance. The maximum likelihood estimators to calculate the logit (log odds) of an event occurring. Computing from log odds to probability, more commonly referred to as “odds,” is simply a matter of taking the coefficient to the e^x, and these probabilities are calculated and discussed for the reader’s benefit in the results section (Hosmer & Lemeshow 1989).

THE QUALITATIVE STUDY

Sample

Four nascent firms were chosen for in-depth case studies. The individuals were chosen from the ERC database, the same database utilized for the quantitative analysis. Respondents were sampled by the maximum variety criteria. The key interest was to find out if there were institutional reasons to why nascent firms were doing business plans, and if institutional reasons lead to instrumental differences, in terms of success. Criteria for success (termination or profit), and planning behaviour (existence/non existence of business plans) guided our sample. The following groups of businesses were therefore selected:

• Nascent firms that started with business plans, that terminated after 12 months
• Nascent firms that started without business plans, that terminated after 12 months
• Nascent firms that started with business plans, that lead to a profitable business after 24 months
• Nascent firms that started without business plans, that lead to a profitable business after 24 month

Sampling was made in this manner to simplify analysis. This type of qualitative sampling is a combination of what Yin (1989) calls literal replication and theoretical replication. We conducted the sample with these concepts at hand. It not a pure literal replication, because no two firms was selected from the exact same reason. However, attributes of the firms were chosen in such a way, that they always could be compared with attributes in another firm. For example, a nascent firm that did business plan could always be compared with one who did not, and one that did. A nascent firm that failed could be compared with another that failed, and one that did. This sampling frame was chosen because of its superior efficiency. Amounts of interviews could be reduced to a half, which reduce costs for data gathering to a half. The full strength from the literary replication logic cannot be drawn i.e. we sacrifice some reliability claims to increase efficiency. The sampling logic that we used for selecting our cases is not utilised fully in this study. The analysis is conducted, using the cases as illustrative examples in the different groups, rather than for analytical generalisation (Yin, 1989)

Pre-knowledge about business planning in nascent firms was gathered from the ERC study and literature on entrepreneurship in nascent firms. A specific theoretical focus was utilized in the study, based on our interpretation of the results in the quantitative study. Firms might choose to use business plans, not for prescriptive reasons, but for institutional reasons. Questions to the firms were made in three major areas, institutionalisation in the form of isomorphic pressures, external context and historical context. Questions about these three areas were asked in a theme oriented way. Through knowledge of the respondents answers in the quantitative study, we were able to confront the respondent in cases were ambiguous information was presented.

In the cases where the respondents completed a business plan, we also checked the answers the respondents gave in relation to the actual business plan they wrote. With the use of interview material, actual business plans and the extensive quantitative data, we were able to cross verify the answers given by the respondents.

Initial contacts with the respondents were done through a telephone contact. In this telephone contact, we introduced our interest in their firm and business planning. Nothing from the results of the quantitative study was reviled. Interviews were conducted face- to- face with respondents averaging in about 1 hour each. The interviews were conducted in the homes or at the workplace of the respondent. The intent was to put the interviewees in as comfortable situation as possible. After approval given by the respondent, the interviews were recorded with a micro-recorder. This has two distinct advantages. Firstly, all conversation can be transcribed and be used for later reference and analysis. Facets of the conversation that otherwise easily can be lost. Secondly the interviewer can fully focus on the interview, and make observations. This enables a more “natural” conversation between the researcher and the respondent, it enables the researcher to fully focus on the conversation and on making observations.

The Coding Process and Principles

The theory of institutional isomorphism (DiMaggio and Powell, 1983) was used to guide coding. Data was coded into coercive, mimetic and normative institutional pressures. Coding followed a specific procedure. First the theoretical concept was defined. Secondly, a coding principle was established for the specific concept. With coding principle we mean words, ques or items that are associated with the specific activity. Thirdly, a typical example of a correct code was described, to simplify coding. Table 3 presents the principles guiding our qualitative coding.

Based on the criteria mentioned in Table 3, we have coded the content of the interview transcripts. Sections, or sentences in the text fitting any of the isomorphism’s mentioned above were coded accordingly. As assistance in this coding work, the text analysis program NUD*IST was used. NUD*IST was used to keep track of the code.