The issues of business planning and practical dimensions of entrepreneurship have been addressed by the recent literature in the social sciences. Although one can hardly speak about a unified research agenda, some of these studies are instructive. First, there is a stream of research on business artifacts and their uses, generally informed by the insights of the literature recently emerged from the integration of economic sociology and STS (Callon et al. 2009, Callon et al. 2007, Callon 2008, Callon 1998, Callon and Muniesa 2005, Miller 2008, Miller 2008a, Latour and Lepinay 2009, Pinch and Swedberg 2008, MacKenzie 2006, McFall 2014). For example, it has been argued that “technology roadmaps” as documents mediating between the fields of science and the economy can significantly influence the development of the industry, as it was demonstrated using the case of the Moore's Law and microelectronics (Miller&O'Leary 2007); investment plans can also shape the actual strategy of the firm, as M.Gireaudeau has argued by studying Renault do Brasil (Gireaudeau 2008). Corporate business plans can be devised and used for various purposes, inside and outside of the firm; they can be promoted as well as contested by different actors encouraging “debates across hierarchies”, but also serve as “tools of practice”, enhancing the strategic imagination of business actors (Giraudeau 2008: 293-294, Giraudeau 2010). The authors working in this domain developed a remarkably complex view on the process of business planning, which comprises a diverse set of activities of writing, revision and discussion, and can have various purposes.
Business models are another important artifact of the everyday economic life. As Doganova and Eyquem-Renault show, business models that have proliferated after the dotcom bubble in the 2000s are remarkably non-trivial entities: they not simply contain a certain amount of information, but are used in the mobilization of different agents for the support of the proposed venture. Combining narrative and calculative elements, business models serve as a scale models of the new business aimed at the demonstration of its trustworthiness and commercial feasibility. In this way, business models can attract the future partners and help entrepreneurs recognize hidden opportunities and threats of their future business (Doganova and Eyquem-Renault 2009). In this sense, business models are not neutral artifacts merely representing the reality behind (new firm's organizational structure and key capabilities); they also convince potential investors and other stakeholders that the new venture is worth dealing with.
This tension has been differently articulated in the organization studies literature. The research on organizational ecology has shown that new firms (or non-commercial organizations) are extremely dependent on the available resources which they have to mobilize in order to survive (Meyer and Rowan 1977, Meyer 1986, Hannan and Freeman 1977, DiMaggio and Powell 1983, Stinchcombe 1965). In order to have the access to the needed resources (for example, financial support provided by the state), new organizations have to increase their legitimacy in the eyes of the state regulatory or auditing agencies by adjusting the formal structure, accounting documentation or adopting certain management techniques. Importantly, these adjustments do not necessarily fit the logic of technical efficiency, but rather fulfill the requirements of transparency, accountability and institutional legitimacy that can push the formal organizations towards greater conformity (DiMaggio and Powell 1983). Carruthers and Espeland apply these insights in their influential study of the history of accounting practices from the early modern period, when the practice of double-entry bookkeeping was invented (Carruthers and Espeland 1991). The authors show that the standards of bookkeeping which were seen by Weber and Sombart as the key instrument of capitalist rationalization (Chiapello 2007), were not purely rational techniques, but have always contained an important rhetorical element. The religious appeals in the opening of accounting books were aimed at increasing the legitimacy of the business described and showing its transparency and trustworthiness to the outsiders.
This dualism between the (technical) efficiency and (institutional) legitimacy also informs the scarce existing studies of business planning in venture capital industry. The most indicative is perhaps the study conducted by Kirsh, Goldfarb and Gera in 2009 (Kirsh, Goldfarb and Gera 2009). The authors assembled a representative sample of funding requests sent to an American VC firm (n = 722) during the 1999-2002 period and tried to assess the influence of business plans on the actual VC decision making. They theorized business plans as twofold documents performing informational (communicative) and ceremonial roles. “This logic guides an empirical strategy that discerns between the inclusion of information in an attempt to conform to norms, versus the inclusion of information to communicate important attributes of the venture” (Kirsh, Goldfarb and Gera 2009: 491). The business plans submitted by the entrepreneurs to the venture capital firms are seen “as predominantly ceremonial or predominantly communicative” (Ibid.). Business plans submitted to a VC firm may include the information concerning the previous funding history, description of the firm's human capital, entrepreneurial experience of the founders, organizational and team structure, etc. For example, proposals reporting greater professional business experience of the founders may be more likely to receive funding, in which case they serve the communicative purpose. On the contrary, if the mere fact of inclusion the information of prior business experience increases the likelihood of funding (as opposed to the non-inclusion), this entry in the business plan plays a ceremonial role and demonstrates the firm's obedience to the formal standards; the VC accesses the actual information from the other sources. The authors find that business planning artifacts are not important sources of information for venture capital decision making: the crucial information is learned from other sources (for example, from the network of partners of the VC firm), and at best business plans play a modest ceremonial role (Kirsh, Goldfarb and Gera 2009: 509). This study has important limitations, however. First, it analyzes the role of business plans only in the initial decision making: i.e., whether or not the VC will fund the proposed venture. In this context business plans can be seen only as information containers or legitimacy attractors; however, they still play a role during the later stages, when the initial funding is already received. Moreover, such a depiction of venture capital activity reduces it to the technical functions of screening and funding new entrepreneurial projects, and thus misses the whole process of the new venture creation, in which venture capitalists actively participate by educating and socializing entrepreneurs, changing and adjusting the business model, revising and rewriting the business plan, etc. Finally, and most importantly, the untenable dualism of communicative and ceremonial roles of business plans overlooks their specificity: there is no difference between a business plan of the new venture, financial account or formal organizational structure, since all these entities can be seen either as rational techniques allowing for a greater efficiency, or formal ceremonies increasing legitimacy. However, the difference lies precisely in the fact that entrepreneurial planning is a radically future-oriented activity: business plans do not represent any solid reality, because the entities or “new combinations” outlined in the plans are non-existent (Giraudeau 2012a). The radical uncertainty of the future is the crucial condition that makes the venture capital “market for virtualities” (Giraudeau 2012a: 213) different from the other stable economic activities (Beckert 2014).
This paradox was reflected by some of the early debates concerning business plans and their usefulness in the venture capital industry, and in entrepreneurship in general. What is better: to develop a comprehensive systematic business plan, loaded with detailed financial projections and accounting statements, or make an easy-read synthetic concise document, briefly and rigorously describing the key characteristics of the business model? And what's the utility of a business plan, if it does not (and in fact, can not) provide any “proofs” of the product, the market, the team? A good business plan, therefore, can be convincing only if it is no longer a plan – if it is already (at least partly) realized. “...the issue is to know whether the business plan should just be realistic, or actually real. If all assumptions made in the plan have to be attested by supporting data, then the plan is no more a plan, but the description of an existing business. There is indeed a tension towards the immediate actualization of the plan in the “back-up” norm of business planning, which tends to imply that filling in the planning forms means fulfilling the planned firm” (Giraudeu 2012a: 224).
The scarce possibilities of an actual empirical grounding of the business plan, and the need to provide such an evidence in order to convince the investors and other potential stakeholders, to “prove” the feasibility of the proposed venture, form a tension that is specific for the venture capital market. But in fact it also reflects a larger paradox of modern economic life, which is, on the one hand, increasingly governed by automated technologies and “scientific” standards and methods of management, accounting, planning etc (Mitchell 2008, Callon 1998, Callon et al. 2007), but on the other hand is characterized by the proliferation of what J. Beckert has called “fictions” (Beckert 2011). According to Beckert, many economic decisions in such diverse areas as consumer credit, investment, financial trading, business strategy etc, are taken on the basis of information and expectations that have no empirical grounding – and in this sense may be termed as “fictional”. Beckert argues that the lack of a solid empirical ground of economic decision ipso facto enhances the actor's imagination and is a source of innovation, creativity and dynamism in the capitalist economy. On the other hand, and quite in line with the conventional critiques of reckless financial speculation and “virtualization” of the economy, this “fictionality” of economic action (Beckert 2013a), for example, in case of venture capital investments based solely on the quick reading of a few pages business plan, may have many undesirable unintended consequences – supporting risk-neutrality among investors or triggering crises. The “dot-com bubble” of the 1999-2001, the first big crisis of the “virtual economy”, when dozens internet-companies went bankrupt, and thousands of startup employees found themselves unemployed and financially vulnerable, has influenced the standards of business planning and pushed for a more prudent ways of financing promising entrepreneurial projects. No empirical evidence however comes to support this claim of a decline in the production of business plans in the United States or anywhere else around the world. […] In spite of all the issues it may raise, the business plan has indeed proliferated on the market for entrepreneurial finance, as a tool sufficiently efficient in making supply and demand meet and eventually reach an agreement over the future (Giraudeau 2012a: 226). On the other hand, the controversy of “fictions” also recalls the critiques against pre-formatted business plans expressed by one of the venture capital industry's very founders, G.F.Doriot. Describing business plans as “fashionable” and “worthless” documents, ridiculously superficial and misleading, without any trace of hard work and real thinking (Giraudeau 2012a: 227). Thus, the proliferation of business plans and business models for startups not only symbolizes the remarkable vitality of the “fictional” economy, but suggests that “fictions” play a more complex role in the workings of contemporary capitalism, than it might seem. The sharp critiques, along with celebrations, of business plans, could be seen through the lenses of “fictionality” of economic action, and the study of business planning may shed light on the role of “fictions” in the economy.