diff --git a/packages/cli/src/commands/create-app/createApp.ts b/packages/cli/src/commands/create-app/createApp.ts
index b638c22353..e28cb376b9 100644
--- a/packages/cli/src/commands/create-app/createApp.ts
+++ b/packages/cli/src/commands/create-app/createApp.ts
@@ -21,21 +21,11 @@ import inquirer, { Answers, Question } from 'inquirer';
 import { exec as execCb } from 'child_process';
 import { resolve as resolvePath } from 'path';
 import os from 'os';
-import { Task, templatingTask } from '../../lib/tasks';
+import { Task, templatingTask, installWithLocalDeps } from '../../lib/tasks';
 import { paths } from '../../lib/paths';
 import { version } from '../../lib/version';
 const exec = promisify(execCb);
 
-// List of local packages that we need to modify as a part of an E2E test
-const PATCH_PACKAGES = [
-  'cli',
-  'core',
-  'dev-utils',
-  'test-utils',
-  'test-utils-core',
-  'theme',
-];
-
 async function checkExists(rootDir: string, name: string) {
   await Task.forItem('checking', name, async () => {
     const destination = resolvePath(rootDir, name);
@@ -80,19 +70,7 @@ async function buildApp(appDir: string) {
     });
   };
 
-  // e2e testing needs special treatment
-  if (process.env.BACKSTAGE_E2E_CLI_TEST) {
-    Task.section('Linking packages locally for e2e tests');
-    await patchPackageResolutions(appDir);
-  }
-
-  await runCmd('yarn install');
-
-  if (process.env.BACKSTAGE_E2E_CLI_TEST) {
-    Task.section('Patchling local dependencies for e2e tests');
-    await patchLocalDependencies(appDir);
-  }
-
+  await installWithLocalDeps(appDir);
   await runCmd('yarn tsc');
   await runCmd('yarn build');
 }
@@ -111,65 +89,6 @@ export async function moveApp(
   });
 }
 
-async function patchPackageResolutions(appDir: string) {
-  const pkgJsonPath = resolvePath(appDir, 'package.json');
-  const pkgJson = await fs.readJson(pkgJsonPath);
-
-  pkgJson.resolutions = pkgJson.resolutions || {};
-  pkgJson.dependencies = pkgJson.dependencies || {};
-
-  for (const name of PATCH_PACKAGES) {
-    await Task.forItem(
-      'adding',
-      `@backstage/${name} link to package.json`,
-      async () => {
-        const pkgPath = paths.resolveOwnRoot('packages', name);
-        // Add to both resolutions and dependencies, or transitive dependencies will still be fetched from the registry.
-        pkgJson.dependencies[`@backstage/${name}`] = `file:${pkgPath}`;
-        pkgJson.resolutions[`@backstage/${name}`] = `file:${pkgPath}`;
-
-        await fs
-          .writeJSON(pkgJsonPath, pkgJson, { encoding: 'utf8', spaces: 2 })
-          .catch((error) => {
-            throw new Error(
-              `Failed to add resolutions to package.json: ${error.message}`,
-            );
-          });
-      },
-    );
-  }
-}
-
-async function patchLocalDependencies(appDir: string) {
-  for (const name of PATCH_PACKAGES) {
-    await Task.forItem(
-      'patching',
-      `node_modules/@backstage/${name} package.json`,
-      async () => {
-        const depJsonPath = resolvePath(
-          appDir,
-          'node_modules/@backstage',
-          name,
-          'package.json',
-        );
-        const depJson = await fs.readJson(depJsonPath);
-
-        // We want dist to be used for e2e tests
-        delete depJson['main:src'];
-        depJson.types = 'dist/index.d.ts';
-
-        await fs
-          .writeJSON(depJsonPath, depJson, { encoding: 'utf8', spaces: 2 })
-          .catch((error) => {
-            throw new Error(
-              `Failed to add resolutions to package.json: ${error.message}`,
-            );
-          });
-      },
-    );
-  }
-}
-
 export default async () => {
   const questions: Question[] = [
     {
diff --git a/packages/cli/src/commands/create-plugin/createPlugin.ts b/packages/cli/src/commands/create-plugin/createPlugin.ts
index b0bf1d85b5..1441b16d05 100644
--- a/packages/cli/src/commands/create-plugin/createPlugin.ts
+++ b/packages/cli/src/commands/create-plugin/createPlugin.ts
@@ -28,7 +28,7 @@ import {
 } from '../../lib/codeowners';
 import { paths } from '../../lib/paths';
 import { version } from '../../lib/version';
-import { Task, templatingTask } from '../../lib/tasks';
+import { Task, templatingTask, installWithLocalDeps } from '../../lib/tasks';
 const exec = promisify(execCb);
 
 async function checkExists(rootDir: string, id: string) {
@@ -141,7 +141,9 @@ async function cleanUp(tempDir: string) {
 }
 
 async function buildPlugin(pluginFolder: string) {
-  const commands = ['yarn install', 'yarn build'];
+  await installWithLocalDeps(paths.targetRoot);
+
+  const commands = ['yarn tsc', 'yarn build'];
   for (const command of commands) {
     await Task.forItem('executing', command, async () => {
       process.chdir(pluginFolder);
diff --git a/packages/cli/src/lib/tasks.ts b/packages/cli/src/lib/tasks.ts
index 0753301b78..2fa6220f18 100644
--- a/packages/cli/src/lib/tasks.ts
+++ b/packages/cli/src/lib/tasks.ts
@@ -18,8 +18,12 @@ import chalk from 'chalk';
 import fs from 'fs-extra';
 import handlebars from 'handlebars';
 import ora from 'ora';
-import { basename, dirname } from 'path';
+import { resolve as resolvePath, basename, dirname } from 'path';
 import recursive from 'recursive-readdir';
+import { promisify } from 'util';
+import { exec as execCb } from 'child_process';
+import { paths } from './paths';
+const exec = promisify(execCb);
 
 const TASK_NAME_MAX_LENGTH = 14;
 
@@ -69,7 +73,7 @@ export async function templatingTask(
   destinationDir: string,
   context: any,
 ) {
-  const files = await recursive(templateDir).catch(error => {
+  const files = await recursive(templateDir).catch((error) => {
     throw new Error(`Failed to read template directory: ${error.message}`);
   });
 
@@ -85,7 +89,7 @@ export async function templatingTask(
         const compiled = handlebars.compile(template.toString());
         const contents = compiled({ name: basename(destination), ...context });
 
-        await fs.writeFile(destination, contents).catch(error => {
+        await fs.writeFile(destination, contents).catch((error) => {
           throw new Error(
             `Failed to create file: ${destination}: ${error.message}`,
           );
@@ -93,7 +97,7 @@ export async function templatingTask(
       });
     } else {
       await Task.forItem('copying', basename(file), async () => {
-        await fs.copyFile(file, destinationFile).catch(error => {
+        await fs.copyFile(file, destinationFile).catch((error) => {
           const destination = destinationFile;
           throw new Error(
             `Failed to copy file to ${destination} : ${error.message}`,
@@ -103,3 +107,92 @@ export async function templatingTask(
     }
   }
 }
+
+// List of local packages that we need to modify as a part of an E2E test
+const PATCH_PACKAGES = [
+  'cli',
+  'core',
+  'dev-utils',
+  'test-utils',
+  'test-utils-core',
+  'theme',
+];
+
+export async function installWithLocalDeps(dir: string) {
+  // e2e testing needs special treatment
+  if (process.env.BACKSTAGE_E2E_CLI_TEST) {
+    Task.section('Linking packages locally for e2e tests');
+
+    const pkgJsonPath = resolvePath(dir, 'package.json');
+    const pkgJson = await fs.readJson(pkgJsonPath);
+
+    pkgJson.resolutions = pkgJson.resolutions || {};
+    pkgJson.dependencies = pkgJson.dependencies || {};
+
+    if (!pkgJson.resolutions[`@backstage/${PATCH_PACKAGES[0]}`]) {
+      for (const name of PATCH_PACKAGES) {
+        await Task.forItem(
+          'adding',
+          `@backstage/${name} link to package.json`,
+          async () => {
+            const pkgPath = paths.resolveOwnRoot('packages', name);
+            // Add to both resolutions and dependencies, or transitive dependencies will still be fetched from the registry.
+            pkgJson.dependencies[`@backstage/${name}`] = `file:${pkgPath}`;
+            pkgJson.resolutions[`@backstage/${name}`] = `file:${pkgPath}`;
+
+            await fs
+              .writeJSON(pkgJsonPath, pkgJson, { encoding: 'utf8', spaces: 2 })
+              .catch((error) => {
+                throw new Error(
+                  `Failed to add resolutions to package.json: ${error.message}`,
+                );
+              });
+          },
+        );
+      }
+    }
+  }
+
+  await Task.forItem('executing', 'yarn install', async () => {
+    await exec('yarn install', { cwd: dir }).catch((error) => {
+      process.stdout.write(error.stderr);
+      process.stdout.write(error.stdout);
+      throw new Error(
+        `Could not execute command ${chalk.cyan('yarn install')}`,
+      );
+    });
+  });
+
+  if (process.env.BACKSTAGE_E2E_CLI_TEST) {
+    Task.section('Patchling local dependencies for e2e tests');
+
+    for (const name of PATCH_PACKAGES) {
+      await Task.forItem(
+        'patching',
+        `node_modules/@backstage/${name} package.json`,
+        async () => {
+          const depJsonPath = resolvePath(
+            dir,
+            'node_modules/@backstage',
+            name,
+            'package.json',
+          );
+          console.log('DEBUG: depJsonPath =', depJsonPath);
+          const depJson = await fs.readJson(depJsonPath);
+
+          // We want dist to be used for e2e tests
+          delete depJson['main:src'];
+          depJson.types = 'dist/index.d.ts';
+
+          await fs
+            .writeJSON(depJsonPath, depJson, { encoding: 'utf8', spaces: 2 })
+            .catch((error) => {
+              throw new Error(
+                `Failed to add resolutions to package.json: ${error.message}`,
+              );
+            });
+        },
+      );
+    }
+  }
+}