Financial planning and control in very small start-up companies: antecedents and effects on company performance

Abstract

This study motivates and tests hypotheses about the antecedents of the use of financial planning and control systems in very small and young start-up firms, and, in turn, the effect of this on firm performance. This setting is of particular interest since theory on financial planning and control in start-up firms is not fully specified when it comes to very small and young firms. Based on survey data, we found educational background to be an antecedent of the use of financial planning and control systems, and some support for work experience as an antecedent. Use of financial planning and control systems, in turn, was found to be an antecedent of company performance. Although theory on start-up firms suggests that sophisticated financial planning and control activities might not be beneficial for very small and young start-ups, we found empirical evidence that indicates the opposite.