Omitted Variable Bias in the Link Between Planning and Performance

Authors

Kirk C. Heriot, Western Kentucky UniversityFollow
Noel D. Campbell, North Georgia College & State UniversityFollow
R. Zachary Finney, North Georgia College & State UniversityFollow

Issue Season

Fall

Document Type

Article

Abstract

This article argues that existing research poorly specifies the link between planning and performance because of omitted variable bias. Researchers agree planning is a critical part of creating any new venture. Many researchers assess planning by whether a small firm has a written business plan. Unfortunately, efforts empirically to validate this relationship have been inconclusive. This article proposes that researchers should assess business plans both on the quality of the plan (and the planning process that produced it), and on the quality of the underlying business opportunity. Failure to account for both aspects of a business plan amounts to omitted variable bias, frustrating attempts to accurately estimate the true relationship.

Recommended Citation

Heriot, Kirk C.; Campbell, Noel D.; and Finney, R. Zachary (2004) "Omitted Variable Bias in the Link Between Planning and Performance," New England Journal of Entrepreneurship: Vol. 7: No. 2, Article 6.
Available at: https://digitalcommons.sacredheart.edu/neje/vol7/iss2/6