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College of Business Administration

WORKING PAPER SERIES IN BUSINESS STUDIES


Volume 1 spring 2015

WHAT DO WE STILL NEED TO KNOW ABOUT


BUSINESS PLAN COMPETITIONS?

Dr. Syed Awais Ahmad Tipu

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WHAT DO WE STILL NEED TO KNOW ABOUT BUSINESS
PLAN COMPETITIONS?

Syed Awais Ahmad Tipu


Department of Management, Marketing, and Public Administration
College of Business Administration
University of Sharjah
United Arab Emirates
Tel:+971-6-5053548
Email: stipu@sharjah.ac.ae

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PUBLISHED BY:

College of Business Administration, University of Sharjah


P.O. Box: 27272, Sharjah – United Arab Emirates,
Tel: (9716) 5053-545
Fax: (9716) 5050-513
E-Mail: businessadministration@sharjah.ac.ae

SERIES EDITORS:

Dr. Abu Elias Sarker


Dr. Andi Duqi

DISCLAIMER:

The views expressed in this paper are those of the author alone and do not
necessarily reflect the view of the UoS. CBA Working Papers have not been
subjected to formal review or approach. They are distributed in order to make
the result of the current research available to others, and to encourage
discussions and suggestions.

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WHAT DO WE STILL NEED TO KNOW ABOUT BUSINESS
PLAN COMPETITIONS?
Business plan competitions are recognized as an important tool for
entrepreneurship education and considered instrumental in spurring
entrepreneurial spirit. The current paper attempts to review the academic
literature on this subject in order to assess the contribution to the knowledge so
far and identify research gaps. The findings suggest that the literature is largely
centered on the structure of the business plan competitions and the
composition and characteristics of the participating teams. The individual level
benefits of business plan competitions include the development of
entrepreneurial skills, opportunity for networking, and access to mentors.
Drawing upon the gaps in the literature, the proposed questions for future
research include the following: What is the survival rate of ventures initiated by
the participants of the business plan competitions? Do the winning and/or losing
teams continue to develop the idea and eventually initiate the venture? Do the
winning teams get funding from the investors? What are the ethical
consequences of business plan competitions in terms of the idea protection for
participants? Are the mentors willing to support the business plan participants
even after the competition? Why do students decide to opt out of a business
plan competition? Exploring the dynamics of business plan competitions is a
lucrative area for research. While much is know about the structure and the
benefits of business plan competitions, there are various research gaps which
need to be addressed. The proposed questions for future research will
potentially help in addressing these gaps.

Keywords: Business Plan Competition, Entrepreneurship Education, Centers


for Entrepreneurship, Student Entrepreneurs, Technology Transfer, Incubators,
Team diversity

Introduction

Business plan competitions encourage interest in entrepreneurship in university


community (Barr et al., 2009). A business plan competition is a mechanism that
provides the opportunity to find and stimulate business ideas from students or
aspiring entrepreneurs (Grimaldi and Grandi, 2005). The first single campus
business plan competition in the U.S. was held at Babson college and
University of Texas-Austin in 1984 (Katz, 2003).
As a result of the rapid growth in business plan competitions, numerous
institutions are increasingly involved in international competitions such as Rice
Business Plan Competition, European Business Plan of the Year Competition,
and Research Councils UK Business Plan Competition (Grimaldi et al., 2011).
Many universities send their teams to participate in business plan competitions
at the international level (Hindel, 1997; Maitland, 1996). Top universities
including Harvard, Stanford, Wharton, and MIT conduct their own business plan
competitions (Honing, 2004). Business plan competitions have gained

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significant attention given the priority of the governments to develop
entrepreneurial skills and knowledge for shaping enterprising society (Russell
et al., 2008).
The current paper attempts to review the extant literature in an attempt
to explore the theoretical developments and limitations of the literature on
business plan competition. The structure and the effectiveness of business
plans have gained significant attention of the entrepreneurship scholars, and
consequently limited attention is paid to explore the dynamics of business plan
competitions.
The following sections present the extant literature on the structure, team
composition, and the benefits of the business plan competitions followed by the
set of proposed research questions for future research.

Structure of business plan competitions


Business plan competitions often incorporate multiple rounds and involve
external evaluators. Edwards and Muir (2005) mention different projects under
the University of Glamorgan Enterprise in Education Initiative. One of the
initiatives called “Enterprise awards” consists of a business plan competition
which is open to anyone across the university in order to encourage aspiring
entrepreneurs from multi-discipline areas. Under the initiative “An Enterprise
Awareness Campaign”, the Enterprise team develops a business plan
competition. A local SME is the sponsor and judge of the competition. The
Enterprise team provides business planning workshops to the participants of
the competition. One to one business counseling is provided to those who are
interested to pursue their entrepreneurial careers and launch a real business.
Weisz et al (2010) also provide the description of the format of a
business plan competition at a large graduate business school in Argentina.
This annual competition lasts for six months in which participants go through
three rounds. At the end of each round, participants receive feedback from the
experts. More than 50 judges mainly include entrepreneurs, professional
investors, and business executives. All judges use the same evaluation form
and evaluate only a few plans. At the end of each round, selected teams
advance to the next level. There is no minimum number of plans to be selected
at each stage which underpins that the quality of the business plan is a decisive
factor. Teams can opt-out at any stage which takes into account the important
element of entrepreneurial commitment. Teams present the preliminary
business plans and move to the last stage in which the final winners are
selected.
Jones and Jones (2011) explore the profile of a business planning
competition among business undergraduate students at the University of
Glamorgan. On the first day of the business challenge, students make their
teams ranging from two to nine members and finalize the business idea. The
organizing staff assesses the viability of the proposed idea. The participating
students are given £10.00 capital per team member. The competition requires
students to run the startup business for two weeks and returning a profit within
a week. At the end of the second week, students pitch their ideas to the judges
who are the entrepreneurs, competition staff and peer students. Teams receive
detailed verbal and written feedback from the judges.

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Li et al. (2003) discuss the student business plan competition in China
organized by Tsinghua University. It is a team-based business plan competition
and divided into three stages staring in April and ending in October. First phase
comprises of free seminars, workshops on business plan development, and
networking opportunities. Interested students submit business plans at the end
of the first phase in June. Selected teams are given the opportunity to
participate in a training event in early July. During this time, the teams revise
and resubmit their business plans and winners get “excellent business plan
award.” Only few teams move to the final round of the competition and present
their plans to a panel of judges. Around 12 student startups are launched in the
University industrial park. The university has also established a National
Entrepreneurship Research Center in 2000 to foster entrepreneurial initiatives
in the community. The university also allows students to suspend their studies
for up to three years if they wish to pursue entrepreneurial career and intend to
start a new venture.
Presenting the plan in a convincing manner to potential investors is an
important aspect of the structure of a business plan competition. Limited
literature explores the dynamics of presentations in business plan competitions.
Chen et al. (2009) investigate the effects of venture capitalists’ perceptions of
entrepreneurial passion and preparedness on their subsequent investment
decisions. Entrepreneurs persuade the potential investors by presenting the
business plan. The study finds that preparedness, not passion, positively
affects the VCs’ investment decisions. Cook et al. (2007) report the results of a
four year study of a microenterprise business development program developed
by a state economic development agency. The results show that women
participants score significantly better in presenting their business plans to a
panel of judges.

Centers for entrepreneurship and business plan competitions

Universities often develop dedicated centers for entrepreneurship in order to


foster entrepreneurial spirit among students. Bowers et al. (2005) explore the
academically based entrepreneurship centers in the U.S. and report that around
70 percent of the centers are involved in hosting business plan competitions. In
another similar study, Finkle et al. (2006) study entrepreneurship centers in the
United States and find that around 77 percent of the centers offer business plan
competitions. The centers of entrepreneurship based in universities also often
provide incubation facilities to the graduate startups. Robertson and Collins
(2003) mention the West Yorkshire universities partnership in which they
encourage graduate entrepreneurial aspirations by arranging business plan
competitions, appraisal, and mentoring. They also provide incubation support
in terms of incubation space and financial and business development services.
The businesses using the incubator facilities also have access to specialist
consultants.
Friar and Meyer (2003) provide description of the Northeastern
University Entrepreneurship Center Business Plan Competition. The center
runs a yearly business plan competition. The students attending
entrepreneurship courses are asked to submit their business plans. Only 20 out
of approximately 200 business plans are selected to enter the competition. An
outside panel of judges – venture capitalists and successful entrepreneurs –

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evaluates the business plans and distributes the award package of $60,000
among the winners. All semi-finalists are also exposed to a group of investors
for the possibility of finalizing the deal.
Grimaldi and Grandi (2005) refer to the example of AlmaCube which is
the University of Bologna incubator and supports the initiatives of business plan
competition called “Start-Cup”. AlmaCube host many of the new venture
initiatives and provide space and logistic services. University incubators
facilitate aspiring entrepreneurs during start-up lifecycle stage of new venture
creation (Mian, 1996; Rothaermel and Thursby, 2005). Startup ventures hosted
in university based incubators generally have access to faculty consultants,
student employees, and related R&D services (Grimaldi et al., 2011).

Business plan competitions organized by non-academic entities

In addition to university based business plan competitions, the literature also


reveals studies on business plan competitions organized by non-academic
entities. Klinger and Schundeln (2011) examine the effects of a training
program implemented by an NGO named TechnoServ on entrepreneurial
activity. The main component of the training program is the business plan
competition. A fixed number of participants are selected through a preliminary
screening process. In the second stage, selected participants receive training
which requires them to submit a business plan upon the completion of the
training. A panel of judges evaluates the business plans and selects a smaller
group of participants for the final phase. Additional training and support is
provided to the participants for completing the business plans. At the ends,
judges evaluate the complete plans and selected top business plans receive a
financial reward.
Fleming (1994) provides detailed account of the Annual Student
Enterprise Award in Ireland organized by Industrial Development Authority
(IDA). The program focuses on undergraduate students with the aim to
encourage them to consider self-employment as a viable career option.
Students are encouraged to consider a manufacturing idea or an internationally
traded service idea such as software development or international financial
services. Interdisciplinary teams first enter a regional level competition judged
by the professionals from the business world and representatives from IDA.
Successful teams participate in a national final which is televised live.

Team composition and business plan competitions

The composition and characteristics of the teams participating in a business


idea competition play important role in understanding the dynamics of business
plan competitions. Foo (2010) examines the effects of team members’
experience and external interaction on business idea evaluations. He finds that
the size of the team, mean work experience, and assistance from individuals

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with business founding experience positively relates to the teams’ business
idea evaluation. The study further reveals worse evaluation of business ideas
by smaller teams without a founder included in the team. Team member
characteristics and conflict also affect team effectiveness. In this context, Foo
(2011) find the effect of team diversity and conflict on team effectiveness. He
studies 73 teams and reports that task conflict negatively relates to team
effectiveness. However, member-rated team effectiveness negatively
correlates with race, task, and experience diversity. Moreover, average
experience correlates positively with member-rated team effectiveness. Weisz
et al. (2010) also explore the diversity and social capital of nascent
entrepreneurial teams in business plan competitions. They find that teams with
higher levels of functional diversity perform better whereas internal social
capital may not provide a significant advantage in business plan preparation.
Foo et al. (2005) examine the team diversity and judges’ evaluation of
ideas in a business plan competition. They report that task related diversity
positively relates to judges’ evaluation while the nontask diversity of age and
employment negatively relates to evaluation. Furthermore, larger teams are
more likely to have better outcome than smaller teams. They find that team size
has positive relation with external evaluation. In the same vein, Cook et al.
(2004) find that plans developed by teams get higher scores from the judges in
comparison to solo entrepreneurs. They also report that the timely feedback
from the instructor/facilitator plays an important role in enhancing the plan
quality.

Benefits of business plan competitions


It is pertinent to get insights into the benefits of the business plan competitions
given the increase in the popularity of these competitions in recent years. The
literature examining the benefits of business plan competitions generally
highlights the individual level benefits of participating in a competition.
Individuals are more likely to start new ventures if training supplements
traditional business plan competitions (Klinger and Schundeln, 2011). More
one-on-one assistance to the individuals encourages them to start a new
venture. The participants of business plan competition gain experience with
regard to creative product development, sharpen the capability to tackle
environmental uncertainties, and experience team-building dynamics (Wen and
Chen, 2007).
Russell et al. (2008) find that the business plan competitions provide
access to mentors and networking opportunities, develop entrepreneurial skills,
enhance self-confidence of participants, and increase their risk-taking
propensity. Grimaldi et al. (2011) also contend that the business plan
competitions provide opportunity of training in various aspects of new venture
creation. Participants get cash reward, consulting services, and opportunity to
network with financial and industrial community.
Jones and Jones (2011) find that the participation in a business planning
competition enhances participants’ enterprise skills such as team working,
sales and marketing, leadership, and communication. Participation in a
business plan competition affects subsequent career choices (Fleming, 1994).
The involvement in the business plan competitions encourages students to opt
for self-employment alongside their graduate studies.

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Discussion
Business plan competitions often fall short in focusing on particular industry
growth area and guiding the participants in better addressing the societal
needs. This may lead towards developing micro-businesses but not the high
growth ventures (Friar and Meyer, 2003). Business plan competitions should
be more focused on high potential growth areas and encourage participants to
target certain industries. This is pertinent as high growth ventures are more
likely to generate jobs in comparison to micro-businesses (Friar and Meyer,
2003). In this context, business plan competitions should incorporate guidelines
which should require the participants to propose new venture ideas in
potentially high growth industries.
Though university based business plan competitions have gained
popularity in the recent years, it is unclear what factors discourage students in
participating in a business plan competition. It is possible that the students may
not see the value in preparing a detailed business plan for participating in the
competition. This could be due to the fact that few entrepreneurs prepare a
detailed business plan before initiating the venture (Bhide, 1994). Karlsson and
Hoing (2009) also contend that writing a business plan is not a necessary
condition to start a business. Moreover, some students may not be interested
to share or disclose their business ideas and consequently decide not to
participate in the competition. Future research will improve our understanding
of why students opt out of a business plan competition.
The winning teams of a business plan competition often receive cash
rewards and also get the opportunity to incubate their ideas in university based
incubators. The panel of judges may include the actual investors. Their
likelihood to invest in the proposed venture idea is a significant benefit for the
participants in the competition. One of the dimensions of the effectiveness of
business plan competitions may relate to the number of business plans which
actually receive funding from the investors. However, this area of research
largely remains underexplored.
Extant literature on business pitches (Clark, 2008; Pollack et al., 2012)
could be helpful in understanding the dynamics of presentations in business
plan competitions in an academic setting. Clark (2008) explores the impact of
entrepreneurs’ oral pitch presentation skills on investors’ decision making.
Though oral pitches may not be based on written business plans but it is helpful
to explore critical aspects of presentations in business plan competitions. The
literature on presentations in business plan competitions is underexplored with
regard to the impact of student entrepreneurs’ presentation skills on judges’
evaluation of the business plan and subsequent decision to invest in the
venture. Pollack et al. (2012) explore the linkages among entrepreneurs’
preparedness behavior, perceived cognitive legitimacy and the amount of
funding received. In a business plan competition, students’ preparedness and
the perceived cognitive legitimacy may contribute toward getting higher scores
from the judges.
The use of business plan competitions could be instrumental in
developing the enterprising society. Business plan competitions can be better
aligned with pubic policy. Therefore, a more focused and integrated approach
among industry, academia, and government in encouraging business plan

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competitions could potentially make a far-reaching impact in establishing an
enterprising society. The government agencies, universities, and industry
partners need to work together for harnessing the youth entrepreneurial spirit
and creating the awareness at the societal level. State agencies and academia
are often involved in hosting business plan competitions. However, university
based competitions have gained more popularity. Though there is a plethora of
business plan competitions, somehow the academic literature on the subject is
limited.

Questions for future research


The paper draws upon the aforementioned literature and proposes the following
set of questions in order to guide future research.

1) What is the survival rate of ventures initiated by the participants of


business plan competitions?
2) Do the winning and/or losing teams continue to develop the idea and
eventually initiate the venture?
3) Do the winning teams get funding from the investors?
4) What are the ethical consequences of business plan competitions in
terms of idea protection for participants?
5) Are the mentors willing to support the business plan participants even
after the competition?
6) Why do students decide to opt out of a business plan competition?

Conclusion
The literature on business plan competitions is largely centered on the nature
of business plan competitions focusing on the structure of business plan
competitions and the characteristics of the participating teams. The individual
level benefits of participating in business plan competitions include
development of entrepreneurial skills, opportunity for networking, and access
to mentors.
The business plan competitions mostly have a preliminary round in
which the participants submit their plans which go through the initial screening.
The qualified participants move to the next round in which they sometimes get
training and further refine their plan. The participants present their plans to a
panel of judges and the winners get cash rewards. The judges are often
successful entrepreneurs from the industry. The centers for entrepreneurship
play an instrumental role in harnessing the potential of student entrepreneurs.

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The universities may also incubate the startup ventures and provide a range of
incubation facilities.
Exploring the dynamics of business plan competitions is a lucrative area
for research. While much is know about the structure and the benefits of
business plan competitions, there are various research gaps which need to be
addressed. The proposed questions for future research will potentially help in
addressing these gaps.

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