Abstract
We explore when and how business plans improve venture performance by focusing on two mechanisms: the informational, based on the intrinsic value derived from gathering valuable information, and the institutional, based on the ceremonial value of business plans to signal objectives and expectations to stakeholders. We empirically isolate the mediating role of information search and show that planning affects performance beyond the informational mechanisms, and analyze the role of plan formality, suggesting that the institutional mechanism plays out only in the case of formal business plans. We connect our findings within the debate among promoters and opponents of business planning.
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