Yang Ming Shan

Yang Ming Shan

Wednesday, April 18, 2012

Review: Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the planning-performance relationship in small firms.

An intense debate on the entrepreneurship research concerns quandary entrepreneurs face whether to plan before embarking on the perilous quest for venture success or if they should just storm the castle. Some researches belonging to the planning school propose that business planning is crucial for the survival and development of both new and established small firms. They argue that a systematic, prediction-oriented, and formal approach leads to superior venture performance. An opposing group of researchers, called as learning school, challenges the value of prediction-oriented strategic approaches for an organization’s performances. They propose instead to focus on learning, strategic flexibility, and controlling resources, especially when facing high degrees of uncertainty. The authors stated that the planning scholars who such as Armstrong (1982); Porter (1985); Andrwes (1971); and Ansoff (1991) describe the following key components of business planning which defined as strategic goals, generation of alternative to reach these goals, evaluation and decision among alternatives as well as implementation control. Specially, evaluation and decision among alternatives require market research, forecast, and detailed analysis, particularly of competitors’ strategies. As what Wiltbank et. al. (2006) said that the approach of this planning scholar approach relies substantially on prediction. The rational comprehensive and formal approach to strategy development rests on the belief that business planning helps to predict better and to prepare organizations for future challenges. The authors emphasized the positive effects of planning from Delmar and Shane (2003) which argues that planning allows more rapid decision-making than actuation without prior planning since information gaps can be anticipated and closed. Assumption can be tested without expending the resources. Planning implies the specification of goals and fosters the identification of effectiveness steps to achieve these goals. Planning is enable firm to control goal achievement. Planning scholars argue that the benefit of business planning increase especially in dynamic and unstable external environment as business planning reduces uncertainty, facilities faster decision-making, introduces controls for personal bias and develop new forms of actuation. In the other side, the authors also provided the argumentation from the opposing party of the planning scholar, called as learning scholars. This scholars, cited from Brew and Hunt (1999), advocates an adaptive and incremental approach towards strategy development. Effective strategies can be emergent patterns that do not necessarily follow a predefined, explicit or formal plan (Mintzberg, 1994). Especially in uncertain and unpredictable environments, emergent strategies allow rapid initiation of action to capture arising opportunities (Mosakowski, 1997; Mintzberg and Waters, 1985). Contrary to the planning school, learning school suggests that organizations should focus on learning and pursue flexible ways to adapts strategies when facing high degrees of environmental uncertainty (Hough and White, 2003; Quinn, 1980). Moreover they argue that in the face of dynamic external conditions, formalized and predictive behavior might create internal rigidities. As consequences, an organization’s commitment to plans and regulations can result in lower degrees of adaptation to external changes and lower performance. This article is consisting strong comprehension between planning scholar and learning scholar. The authors give the positive aspects and the problem that occurred in fact. But some missing in this article is the imbalance critiques to planning scholar which no counter of argumentation from planning scholar to learning scholar about their ideas on new entrepreneur, especially the organization of new firms. Source Article: Brinckmann, J., Grichnik D. Kapsa D. (2008). Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the planning-performance relationship in small firms. Journal of Business Venturing, 25 (2010), 24 – 40.

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