Why We Plan: The Impact of Nascent Entrepreneurs' Cognitive Characteristics and Human Capital on Business Planning

• Author: Jan Brinckmann,Sung Min Kim
• Published date: 01 June 2015
• Date: 01 June 2015
• DOI: http://doi.org/10.1002/sej.1197

WHY WE PLAN: THE IMPACT OF NASCENT

ENTREPRENEURS’ COGNITIVE CHARACTERISTICS

AND HUMAN CAPITAL ON BUSINESS PLANNING

JAN BRINCKMANN1* and SUNG MIN KIM2

1ESADE—Business School, Ramon, Llull University, Barcelona, Spain

2Quinlan School of Business, Loyola University Chicago, Chicago, Illinois, U.S.A.

We examine the impact of nascent entrepreneurs’ cognitive attributes and human capital on

business planning behavior.We find that entrepreneurial self-efficacy facilitates development of

formal business plans and entrepreneurial perseverance promotes engaging in business plan-

ning activities. Further, advanced academic education leads nascent entrepreneurs to engage

in business planning activities and create formal business plans, but prior work experience has

a marginal effect on business plan formality. The results further indicate that a nascent

entrepreneur’s striving for outside financing promotesbusiness planning activities, while being

in a supportive environment or a member of a business association does not impact business

planning behavior. Copyright © 2015 Strategic Management Society.

INTRODUCTION

Faced with incomplete information and high uncer-

tainty, nascent entrepreneurs, who are in the process of

establishing new firms, must determine an appropriate

course of action (Alvarez and Busenitz, 2001; Dess,

Lumpkin, and Covin, 1997; Gruber, 2010;

Hutzschenreuter and Kleindienst, 2006). Business

planning has received great attention from entrepre-

neurship and strategy scholars as a central activity to

make sense of business environments and identify an

appropriate course of action (Grant, 2003; Miller and

Cardinal, 1994; Schwenk and Shrader, 1993; Shane

and Delmar, 2004; Shrader, Taylor, and Dalton, 1984).

However, the extant literature focuses almost exclu-

sively on the performance effects of business planning

(Castrogiovanni, 1996; Schwenk and Shrader, 1993).

Further, the limited literature on the antecedents of

business planning has uncovered mainly exogenous,

environmental factors where business planning

addresses formal requirements of investors and other

institutions while the content and type of business

planning appears to be less relevant (e.g., Honig and

Karlsson, 2004; Kirsch, Goldfarb, and Gera, 2009).

Taken together, substantial research questions are

raised as to whether an individual’s business planning

is merely a response to institutional forces or, in addi-

tion, if specific characteristics of nascent entrepreneurs

can be identified that lead to business planning activi-

ties. For instance, prior research highlights that the

decision to engage in entrepreneurship is affected by

an individual’s cognitive characteristics and human

capital (Rauch and Frese, 2007; Unger et al., 2011).

However, little is known about how these characteris-

tics of nascent entrepreneurs affect their pursuit of

business opportunities. By explicating the antecedents

that affect an individual’s decision to engage in busi-

ness planning, we can get a better understanding of the

role that business planning fulfills for entrepreneurs,

which is a long-standing and important debate in

entrepreneurship and strategy research (Delmar and

Shane, 2003, 2004; Mintzberg, 1981; Mintzberg,

1994; Shane and Delmar, 2004).

Keywords: cognitive characteristics; human capital; institu-

tional forces; business planning; nascent entrepreneurs

*Correspondence to: Jan Brinckmann, ESADE—Business

School, Ramon Llull University,Ave. Pedralbes 60, 08034 Bar-

celona, Spain. E-mail: jan.brinckmann@esade.edu

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Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 9: 153–166 (2015)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1197

Copyright © 2015 Strategic Management Society