TB CH1,2,3&4

Entrepreneurship, 11e (Hisrich)
Chapter 1 The Entrepreneurial Mind-Set
1) Entrepreneurial thinking is partly a mental process of recognizing a signal and then deciding if
the signal represents an opportunity for someone.
Answer: TRUE
Difficulty: 2 Medium
Learning Objective: 01-01 To introduce the concept of entrepreneurship and explain the
process of entrepreneurial action.
Accessibility: Keyboard Navigation
2) Entrepreneurial thinking partly is about reducing doubt as to whether an opportunity for

someone is also an opportunity for them specifically, and/or processing feedback from action
steps taken.
Answer: TRUE
3) Entrepreneurial opportunities are those situations in which new goods, services, raw materials
and organizing methods can be sold at greater than their production cost.
Answer: TRUE
Difficulty: 1 Easy
4) Entrepreneurial action can be defined as those situations in which new goods, services, raw
materials and organizing methods can be sold at greater than their production cost.
Answer: FALSE
Difficulty: 1 Easy
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5) The McMullen-Shepherd Model helps identify the common traits of successful entrepreneurs.
Answer: FALSE
Difficulty: 1 Easy
6) The McMullen-Shepherd Model explains how knowledge and motivation influence two stages
of entrepreneurial action.
Answer: TRUE
7) In the McMullen-Shepherd Model first-person opportunity beliefs come before third-person

opportunity beliefs.
Answer: FALSE
8) Sustainable entrepreneurship provides only environmental gains for others.
Answer: FALSE
Learning Objective: 01-06 To introduce sustainable entrepreneurship as a means of sustaining
the natural environment and communities and developing gains for others.
9) Superficial similarities exist when the underlying mechanisms of the technology resemble, or
match, the underlying mechanisms of the market.
Answer: FALSE
Difficulty: 1 Easy
Learning Objective: 01-02 To describe how structural similarities enable entrepreneurs to make
creative mental leaps.
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10) Structural similarities exist when the underlying mechanisms of the technology resemble, or
match, the underlying mechanisms of the market.
Answer: TRUE
Difficulty: 1 Easy
11) Bricolage is entrepreneurs making do by applying combinations of the resources at hand to

new problems and opportunities.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 01-03 To highlight bricolage as a source of entrepreneurs' resourcefulness.
12) The effectuation process starts with what one has and selects among possible outcomes.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 01-04 To introduce effectuation as a way expert entrepreneurs sometimes
think.
13) The thought experiment "Curry in a Hurry" is an example of the effectuation process.
Answer: TRUE
think.
14) The casual process of thinking starts with what one has and selects among possible
outcomes.
Answer: FALSE
Difficulty: 1 Easy
think.
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15) For entrepreneurial actions that preserve nature to be considered sustainable
entrepreneurship, they must also develop gains for the entrepreneur, others, and/or society.
Answer: TRUE
16) The question "What is this technology all about?" is a comprehension question.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 01-05 To develop the notion that entrepreneurs cognitively adapt.
17) Comprehension questions are designed to stimulate entrepreneurs to think about their own
understanding of the nature of the environment.
Answer: TRUE
Difficulty: 1 Easy
18) Asking "How is this problem similar to problems I've already solved"? is an example of a
connection task.
Answer: TRUE
19) A reflection task would involve thinking about what strategies should be used to solve a
problem.
Answer: FALSE
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20) Entrepreneurs have stronger intentions to act when taking action is perceived to be
impossible and risky.
Answer: FALSE
Difficulty: 1 Easy
21) Entrepreneurs' intentions are based on their perception of feasibility rather than someone
else's impression of whether it is feasible.
Answer: TRUE
22) Perceived desirability refers to the degree to which an individual has a favorable or
unfavorable evaluation of the potential entrepreneurial outcomes.
Answer: TRUE
Difficulty: 1 Easy
23) An entrepreneur is rarely able to start a new business without some form of formal
education.
Answer: FALSE
24) Research indicates that male entrepreneurs tend to start their first significant venture in their
middle 30s, while women entrepreneurs tend to do so in their early 30s.
Answer: FALSE
25) Previous start-up experience is a good predictor of starting subsequent businesses.
Answer: TRUE
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26) Dissatisfaction with various aspects of one's job often motivates the launching of a new
venture.
Answer: TRUE
Difficulty: 1 Easy
27) Most entrepreneurs indicate that their most significant venture was not their first one.
Answer: TRUE
Difficulty: 1 Easy
28) Role models are individuals who give psychological support to the entrepreneur especially
during the start-up phase.
Answer: FALSE
29) Role models can include family members as well as industry professionals.
Answer: TRUE
Difficulty: 1 Easy
30) In a social network there are two major properties, density and centrality.
Answer: TRUE
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31) Entrepreneurial Opportunities are defined as:
A) new market entry through entrepreneur action.
B) the entrepreneur's mental processes in deciding whether or not to act on a potential
opportunity.
C) a feasibility assessment.
D) situations in which new goods, services, raw materials and organizing methods can be sold at
greater than their production cost.
Answer: D
Difficulty: 1 Easy
32) In Stage One of the McMullen-Shepherd Model:

A) the entrepreneur decides whether or not there is an opportunity for someone.
B) the entrepreneur consults experts in the market area of interest.
C) the entrepreneur decides whether the opportunity that exists is a match with their own
knowledge and motivation.
D) the entrepreneur engages in bricolage.
Answer: A
33) In Stage Two of the McMullen-Shepherd Model:

A) the entrepreneur deals with the business failure through counseling.
B) the entrepreneur decides whether or not there is an opportunity for him or her personally.
C) the entrepreneur goes through the causal process of thinking structurally.
D) the entrepreneur consults colleagues from previous jobs.
Answer: B
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34) With regard to thinking structurally, superficial similarities:
A) exist when the underlying mechanisms of the technology resemble (or match) the underlying
mechanisms of the market.
B) exist when supply is less than demand.
C) exist when entrepreneurs engage in bricolage.
D) exist when the basic (relatively easy to observe) elements of the technology resemble the
basic elements of the market.
Answer: D
35) The causal process of thinking:

A) starts with a desired outcome and focuses on the possible means to generate that outcome.
B) starts with what one has and selects among possible outcomes.
C) involves bricolage.
D) starts with brainstorming by meeting with industry professionals.
Answer: A
think.
36) When entrepreneurs make do by applying combinations of the resources at hand to new
problems and opportunities, this is known as:
A) sustainable entrepreneurship
B) perceived desirability
C) entrepreneurial intentions
D) bricolage
Answer: D
Difficulty: 1 Easy
Learning Objective: 01-03 To highlight bricolage as a source of entrepreneurs' resourcefulness.
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37) Questions designed to increase an entrepreneurs' understanding of the nature of the
environment are known as:
A) strategic questions
B) connection tasks
C) reflection tasks
D) comprehension questions
Answer: D
Difficulty: 1 Easy
38) An entrepreneur considering if what they are doing makes sense is an example of:
A) a strategic question
B) a connection task
C) a reflection task
D) a comprehension question
Answer: C
39) ________ are designed to stimulate thought about entrepreneurs' understanding and feelings
as they progress through the entrepreneurial process.
A) Strategic questions
B) Connection tasks
C) Reflection tasks
D) Comprehension questions
Answer: C
Difficulty: 1 Easy
40) Individuals have stronger intentions to act when taking action is perceived to be ________
and desirable.
A) elusive
B) feasible
C) flexible
D) risky
Answer: B
Difficulty: 1 Easy
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41) Which among the following aspects most affects an entrepreneur's perception of feasibility?
A) Locus of control
B) Learning style
C) Perceived desirability
D) Self-efficacy
Answer: D
42) On the education background, entrepreneurs:

A) are less educated than the general population.
B) cite an educational need in the areas of finance, strategic planning, marketing, and
management.
C) who lack a formal education, fail to create new businesses and exploit discovered
opportunities.
D) cite formal education to be indispensible in starting a new business.
Answer: B
43) All of the following statements are true of sustainable entrepreneurship except:
A) Entrepreneurs with a positive attitude toward the natural environment never disengage these
values to exploit an opportunity.
B) It is not just the natural environment that needs sustained; communities also need to be
preserved.
C) Environmental gains include reduced air pollution, improved air quality, and enhanced living
conditions.
D) Social gains include improved child survival rates, longer life expectancy, and equal
opportunity.
Answer: A
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44) Density, in regards to a social network, refers to:
A) the extensiveness of ties between two individuals.
B) the total number of individuals in the network.
C) the distance of connection between the entrepreneur and contact.
D) the fact that most networks are informal and not well organized.
Answer: A
45) The moral support network is different from the professional support network in that:
A) a professional support network includes finding a mentor.
B) moral support is less important than professional support.
C) only the "cheering squad" provides moral support.
D) a moral support network comprises only of personal contacts.
Answer: A
46) Within the moral-support network, most entrepreneurs indicate that their ________ are their
biggest supporters.
A) mentors
B) friends
C) parents
D) spouses
Answer: D
47) Which group in a professional network helps keep a new venture competitive?
A) Clients or buyers
B) Mentors
C) Trade associations
D) Suppliers
Answer: C
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48) Explain the McMullen-Shepherd Model.
Answer: 1. Model explains how knowledge and motivation influence two stages leading to
entrepreneurial action.
2. Stage One is when the potential entrepreneur realizes an opportunity exists for someone.
3. Stage Two is when the potential entrepreneur decides whether or not the opportunity is right
for them personally in terms of their skill, knowledge and motivation.
49) Define superficial similarities and structural similarities. Which of the two is considered the
more challenging for entrepreneurs?
Answer: 1. Superficial similarities exist when the basic (relatively easy to observe) elements of
the technology resemble (match) the basic (relatively easy to observe) elements of the market.
2. Structural similarities exist when the underlying mechanisms of the technology resemble (or
match) the underlying mechanisms of the market.
Structural similarities were identified as the most challenging.

50) Describe the difference between the causal process and the effectuation process.
Answer: Effectuation is process that starts with what one has (who they are, what they know,
and whom they know) and selects among possible outcomes. Basically identifying resources and
THEN finding an opportunity to fit whereas the casual process starts with a desired outcome and
focuses on the means (what resources are needed) to generate that outcome.
think.
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51) Identify and define the four types of questions/tasks related to increasing cognitive ability.
Answer:
1. Comprehension questions are designed to increase entrepreneurs' understanding of the nature
of the environment
2. Connection tasks are designed to stimulate entrepreneurs to think about the current situation in
terms of similarities to and differences from situations previously faced and solved
3. Strategic Tasks are designed to stimulate entrepreneurs to think about which strategies are
appropriate for solving the problem (and why) or pursuing the opportunity (and how)
4. Reflection tasks are designed to stimulate entrepreneurs to think about their understanding and
feelings as they progress through the entrepreneurial process.
52) Describe sustainable entrepreneurship and give a few examples of economic, environmental,
and social gains it can generate for others.
Answer: Sustainable entrepreneurship focuses on preserving nature, life support, and

community (sustainability) in the pursuit of perceived opportunities to bring future products,
processes, and services into existence for gain (entrepreneurial action) there gain is broadly
construed to include economic and noneconomic benefits to individuals, the economy, and
society (development).
Economic gains for others include employment opportunities, improved access to

quality/valuable goods, and revenues for the government. Environmental gains generated for
others include reduced air pollution, improved air quality, improved drinking water quality, and
other enhanced living conditions. The social gains include improved child survival rates, longer
life expectancy, superior education, equal opportunity, and so on.
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Chapter 2 Corporate Entrepreneurship
1) Developing a spirit of entrepreneurship within the existing organization, called corporate

entrepreneurship, can lower resistance to flexibility, growth, and diversification.
Answer: TRUE
Learning Objective: 02-01 To understand the causes of interest in corporate entrepreneurship.
2) Entrepreneurial endeavors consist of new business venturing, innovativeness, self-renewal,

and reactiveness.
Answer: FALSE
3) Corporate entrepreneurship is most strongly reflected in entrepreneurial activities as well as in

top management orientations in organizations.
Answer: TRUE
Difficulty: 1 Easy
4) Self-renewal includes the redefinition of the business concept, reorganization, and the
introduction of system-wide changes to increase innovation.
Answer: TRUE
5) Internal corporate venturing consists of creating something new of value either by redefining
the company's current products or services, developing new markets, or forming more formally
autonomous or semiautonomous units or firms.
Answer: TRUE
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6) Traditionally managed firms commitment to opportunity is revolutionary with a long
duration.
Answer: FALSE
Learning Objective: 02-02 To introduce the entrepreneurial mode of managing firms and
distinguish it from the traditional mode.
7) Entrepreneurially managed firm structure is usually flat with multiple informal networks.
Answer: TRUE
8) Entrepreneurially run firms are driven by controlled resources whereas traditionally managed
firms are driven by perception of opportunity.
Answer: FALSE
9) Entrepreneurs focus on how to minimize resources needed whereas traditional firms focus on
accumulating resources.
Answer: TRUE
10) Traditionally managed firms typically punish failure.
Answer: TRUE
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11) Organizations that require a rapid return on investment and a high sales volume usually
encourage and support new ideas.
Answer: FALSE
Learning Objective: 02-03 To provide a scale for capturing the extent to which management
adopts entrepreneurial or traditional behaviors.
12) In encouraging a culture for corporate entrepreneurship, using older, proven, technology is
recommended in order to increase stability in the organization.
Answer: FALSE
Difficulty: 1 Easy
13) In creating a culture for corporate entrepreneurship leadership is important.
Answer: TRUE
Difficulty: 1 Easy
14) Most managers in a corporation are capable of being successful corporate entrepreneurs with
the correct training.
Answer: FALSE
Difficulty: 1 Easy
15) In an encouraging climate for corporate entrepreneurship, rewards should be based on the
attainment of established performance goals.
Answer: TRUE
Difficulty: 1 Easy
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16) In corporate entrepreneurship, trial and error are encouraged.
Answer: TRUE
Difficulty: 1 Easy
17) It is important for an entrepreneur to understand all aspects of the environment. Part of this
ability is reflected in the individual's level of creativity, which generally increases with age and
education in most individuals.
Answer: FALSE
Difficulty: 3 Hard
18) The corporate entrepreneur encourages teamwork and uses a multidisciplined approach,
which violates organizational practices and structures taught in most business schools.
Answer: TRUE
19) For an organization with a traditional environment, it is best to facilitate an external process
to establish an entrepreneurial environment.
Answer: TRUE
Learning Objective: 02-04 To discuss how established firms can develop an entrepreneurial
culture and the challenges of doing so.
20) An organization that wants to become more entrepreneurial must learn to be more productive
with fewer resources.
Answer: TRUE
Difficulty: 1 Easy
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21) Entrepreneurial activities tend to immediately affect the bottom line, and hence are seldom
overlooked and receive extensive funding and support.
Answer: FALSE
22) Corporate ventures are totally independent units, hence the equity portion of the
compensation is particularly difficult to handle.
Answer: FALSE
23) One study found that new ventures started within a corporation performed better than those
started independently by entrepreneurs.
Answer: FALSE
Difficulty: 1 Easy
24) Generally, independent, venture-capital-based start-ups by entrepreneurs tend to outperform

corporate start-ups significantly.
Answer: TRUE
25) A dual process model of coping with negative emotions is an approach to negative emotions
based on both avoidance and a proactiveness toward secondary sources of stress arising from a
major loss.
Answer: FALSE
Learning Objective: 02-05 To acknowledge that projects fail and people feel bad about it, and
to introduce the dual process model for maximizing learning from failure experiences.
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26) An entrepreneur with loss-orientation would talk about the business-failure with a close
friend or relative.
Answer: TRUE
Difficulty: 1 Easy
27) An entrepreneur's recovery from grief is detrimental to society.
Answer: FALSE
28) ________ includes a redefinition of the business concept, reorganization, and the
introduction of system-wide changes to increase innovation.
A) Innovativeness
B) New business venturing
C) Self-renewal
D) Proactiveness
Answer: C
Difficulty: 1 Easy
29) Entrepreneurial activities that create something new of value either by redefining the
company's current products or services, developing new markets, or forming more formally
autonomous or semiautonomous units or firms best defines:
A) new business venturing.
B) proactiveness.
C) innovativeness.
D) self-renewal.
Answer: A
Difficulty: 1 Easy
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30) Corporate entrepreneurship is best described as:
A) the hiring of former entrepreneurs.
B) entrepreneurial action within an established organization.
C) the process of buying, or acquiring, entrepreneurial firms.
D) the process of hiring consultants to teach a firm how to be more creative.
Answer: B
Difficulty: 1 Easy
31) ________ includes initiative and risk taking, as well as competitive aggressiveness and
boldness.
A) New business venturing
B) Self-renewal
C) Innovativeness
D) Proactiveness
Answer: D
32) New product development falls under which of the four major components of corporate
entrepreneurship?
A) New business venturing
B) Self-renewal
C) Innovativeness
D) Proactiveness
Answer: C
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33) With regard to the differences between the entrepreneurial and administrative focuses which
of the following is correct?
A) Entrepreneurs focus on slow steady growth and managers focus on rapid growth
B) Entrepreneurs rent or sporadically use resources; managers like to own resources
C) Entrepreneurs are driven by controlled resources; managers by opportunity
D) Entrepreneurs tend to use a hierarchical management structure; managers use a more fluid,
flat approach
Answer: B
34) Having an entrepreneurial orientation toward the control of resources means:

A) that one focuses on accessing others' resources.
B) that one focuses on purchasing resources.
C) that one has a belief that resources are unlimited and therefore easy to obtain.
D) that one focuses on using a hierarchy management structure in allocating resources.
Answer: A
35) Entrepreneurial culture and growth orientation consists of all of the following except:
A) encouraging employees to generate ideas.
B) focusing on opportunities.
C) the desire to grow at a slow and controlled pace.
D) being creative.
Answer: C
Difficulty: 1 Easy
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36) All these are characteristics of an entrepreneurial environment except:
A) there are short term horizons.
B) new ideas are encouraged.
C) the organization operates on frontiers of technology.
D) it uses a multidiscipline teamwork approach.
Answer: A
37) Which of the following is true about corporate entrepreneurship?

A) Equity in a new venture should not be used as a reward due to its uncertain value
B) A company must be willing to invest money without a guarantee of a return in the short term
C) Teams should be segmented by department
D) Top management should not be involved in the process
Answer: B
38) Which of the following is not a leadership characteristic of a corporate entrepreneur

according to the text?
A) Flexibility and vision
B) Persistence
C) Encourages teamwork
D) Encourages colleagues to follow hierarchy
Answer: D
Difficulty: 1 Easy
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39) The first step in establishing corporate entrepreneurship in an organization is:
A) finding mid-level managers to champion ideas
B) developing ways to get closer to customers
C) learn to be more productive with fewer resources
D) securing commitment from top management
Answer: D
40) A sufficient time for top management to be committed to corporate entrepreneurship is:
A) at least one year.
B) at least two years.
C) at least three years.
D) at least ten years.
Answer: C
Difficulty: 1 Easy
41) Which of the following would not occur in the second stage of establishing corporate
entrepreneurship in an organization?
A) Ideas that top management is interested in supporting are identified.
B) Identify an evaluation system for involved employees.
C) The amount of risk money available is specified.
D) Overall program expectations and target results of each corporate venture are established.
Answer: B
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42) When establishing corporate entrepreneurship in an organization rewards should:
A) be tied to the department in which the idea originated
B) be tied to the parent company's stock performance
C) be tied to the performance of the entrepreneurial unit created from the idea
D) not be changed from whatever current system is being used so that risk is encouraged
Answer: C
43) Which of the following is true?

A) Independent, venture-capital-based start-ups by entrepreneurs tend to outperform corporate
start-ups significantly.
B) New ventures started within a corporation performed better than those started independently
by entrepreneurs.
C) Independent entrepreneurs find difficulty in maintaining a long-term commitment.
D) Corporate ventures become profitable twice as fast as independent ventures.
Answer: A
44) When would an entrepreneur be pronounced to have recovered from the grief of a lost
business?
A) On the availability of equally challenging entrepreneurial opportunities
B) Upon a simultaneous engagement in an analysis of the failed business
C) On having evaluated and absorbed the lessons learnt from the failed business
D) When thoughts about the events surrounding, and leading up to the loss of the business, no
longer generate a negative emotional response
Answer: D
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45) Which of the following statements is not true of the loss orientation approach to negative
emotions?
A) Loss orientation is based on both avoidance and proactiveness.
B) Loss orientation involves working through, and processing, some aspect of the loss
experience.
C) Loss orientation breaks emotional bonds to the object lost.
D) Loss orientation focuses on the loss event to create an account of the failure.
Answer: A
Difficulty: 1 Easy
46) Which of the following statements is not true of the restoration orientation approach to
negative emotions?
A) The restoration orientation approach is based on avoidance and proactiveness toward
secondary sources of stress.
B) The restoration orientation approach requires oscillating between two alternate approaches to
loss.
C) The restoration orientation approach involves distracting oneself from thinking about the
failure.
D) The restoration orientation approach focuses one's energy on addressing problems that arise
as a result of the failure.
Answer: B
47) Which of the following is a practical implication of using the dual process of learning from
failure?
A) Recovery from loss offers an opportunity to increase one's knowledge of entrepreneurship.
B) Distracting oneself from thinking about the failure reduces the long-term level of negative
emotions.
C) Allocating attention to the events surrounding the failure provide little opportunity to learn.
D) The recovery process can be enhanced by focusing on either loss orientation or restoration
orientation.
Answer: A
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48) Which of the following is most effective in grief-recovery?
A) Restoration-orientation
B) Loss-orientation
C) Dual process
D) Grief recovery process
Answer: C
Difficulty: 1 Easy
49) Identify and briefly describe the four key elements of corporate entrepreneurship.
Answer: 1. New business venturing: These entrepreneurial activities consist of creating

something new of value either by redefining the company's current products or services,
developing new markets, or forming more formally autonomous or semiautonomous units or
firms.
2. Organizational innovativeness refers to product and service innovation. It includes new

product development, product improvements, and new production methods and procedures.
3. Self-renewal is the transformation of an organization through the renewal of the key ideas on
which it is built. Self-renewal includes a redefinition of the business concept, reorganization, and
the introduction of system wide changes to increase innovation.
4. Proactiveness includes initiative and risk taking, as well as competitive aggressiveness and
boldness, which are particularly reflected in the orientations and activities of top management. A
proactive organization tends to take risks by conducting experiments; it also takes initiative and
is bold and aggressive in pursuing opportunities. Organizations with this proactive spirit attempt
to lead rather than follow competitors in such key business areas as the introduction of new
products or services, operating technologies, and administrative techniques.
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50) Discuss three major ways in which managerial and entrepreneurial decision making differs.
Answer: Eight areas of difference students can choose from:
1. strategic orientation
2. commitment to opportunity
3. commitment of resources
4. control of resources
5. management structure
6. reward philosophy
7. growth orientation
8. entrepreneurial culture
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Basic differences in each dimension:
TABLE 2.1 Distinguishing Entreprenuerially from Traditionally Managed Firms
Entreprenuerial Focus Conceptual Dimension Administrative Focus
Driven by perception of Strategic orientation Driven by controlled resources

opportunity
Revolutionary with short duration Commitment to opportunity Evolutionary with long duration
Many stages with minimal Commitment of resources A single stage with complete
exposure commitment out of decision
Episodic use or rent of required Control of resources Owndership or eo\mployment of

resoures required resources
Flat with multiple informal Management structure Hierarchy

networks
Based on value creation Reward philosophy Based on responsibility and

seniority
Rapid growth is top priority; risk Growth orientation Safe, slow, and steady
accepted to achieve growth
Promoting broad search for Entrepreneurial culture Opportunity search restricted by

opportunities controlled resources; failure
punished
Source: This table is taken from T. Brown, P. Davidsson, and J. Wiklund, "An
Operationalization of Stevenson's Conceptualization of Entrepreneurship as Opportunity-Based
Firm Behavior," Strategic Management Journal 22 (2001), p. 955.
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51) Identify five of the twelve characteristics of an entrepreneurial environment.
TABLE 2.3 Characteristics of an Entrepreneurial Environment
 Organization operates on frontiers of technology

 New ideas encouraged
 Trial and error encouraged
 Failures allowed
 No opportunity parameters
 Resources available and accessible
 Multidiscipline teamwork approach
 Long time horizon
 Volunteer program
 Appropriate reward system
 Sponsors and champions available
 Support of top management
Students can choose five of the twelve from table 2.3 above.
Answer: Answers will vary.

52) An organization wanting to establish a more entrepreneurial firm must implement a

procedure for its creation. Identify and briefly explain the first three steps of the process.
Answer: The first step in this process is to secure a commitment to corporate entrepreneurship
in the organization by top and middle management levels. Without top management
commitment, the organization will never be able to go through all the cultural changes necessary
for implementation.
Second, ideas and general areas that top management is interested in supporting should be
identified, along with the amount of risk money that is available to develop the concept further. It
is also useful to establish overall program expectations and the target results of each corporate
venture.
Third, a company needs to use technology to make itself more flexible. Small companies can
compete against larger companies. Larger companies can make themselves responsive and
flexible like smaller firms.
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53) Define and explain the dual process model of coping with negative emotions.
Answer: Student should define process as shifting between a loss orientation and a restoration
orientation. The student should also explain the two alternate approaches to loss:
loss orientation An approach to negative emotions that involves working through, and
processing, some aspect of the loss experience and, as a result of this process, breaking
emotional bonds to the object lost.
restoration orientation An approach to negative emotions based on both avoidance and a

proactiveness toward secondary sources of stress arising from a major loss.
The entrepreneur can benefit from both orientations while minimizing the costs of maintaining
either for too long.
54) Explain the benefits, or practical implications, of using the dual process model of coping
with negative emotions.
Answer:
1. Helps to reduce feelings of shame and embarrassment.
2. Realizing that psychological and physiological outcomes caused by the feelings of loss are
"symptoms" can reduce secondary sources of stress and may also assist with the choice of
treatment.
3. Understanding that there is a process can provide entrepreneurs some comfort that their
current feelings of loss, sadness, and helplessness will eventually diminish.
4. The recovery and learning process can be enhanced by some degree of oscillation between a
loss orientation and a restoration orientation.
5. Recovery from loss offers an opportunity to increase one's knowledge of entrepreneurship.

This provides benefits to the individual and society.
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Chapter 3 Generating and Exploiting New Entries
1) An entrepreneurial strategy has three key stages—the generation of a new entry opportunity,
the exploitation of a new entry opportunity, and a feedback loop back to the first stage.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 03-01 To understand that the essential act of entrepreneurship involves
new entry.
2) A highly skilled workforce represents an important resource, but the impact of this resource
on performance is reduced when it is combined with an organizational culture that enhances
communication, teamwork, and innovativeness.
Answer: FALSE
Difficulty: 1 Easy
Learning Objective: 03-02 To be able to think about how an entrepreneurial strategy can first
generate and then exploit over time a new entry.
3) A new entry can be either offering a new product to a new market or creating a new
organization.
Answer: TRUE
Difficulty: 1 Easy
new entry.
4) Newness of a new entry is always an advantage.
Answer: FALSE
new entry.
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5) An entrepreneurial strategy is the set of decisions, actions, and reactions that protect the firm
from new entrants.
Answer: FALSE
Difficulty: 1 Easy
new entry.
6) The long-run performance of a firm is dependent upon the ability to generate and exploit
numerous new entries.
Answer: TRUE
new entry.
7) In order to be the basis for a firm's superior performance, a bundle of resources must be
valuable, rare, and imitable.
Answer: FALSE
8) The purpose of a franchise is to protect the owner of a unique technology from people
imitating that technology.
Answer: FALSE
9) Knowledge is the basis of the entrepreneurial resource.
Answer: TRUE
Learning Objective: 03-03 To understand how resources are involved in the generation of
opportunities.
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10) Experience is idiosyncratic—unique to the life of the individual.
Answer: TRUE
Difficulty: 1 Easy
opportunities.
11) The knowledge needed to generate innovation cannot be easily learned from a textbook.
Answer: TRUE
opportunities.
12) The entrepreneur's market knowledge is deeper than the knowledge that could be gained
through market research.
Answer: TRUE
opportunities.
13) Technological knowledge refers to the entrepreneur's possession of information, technology,

know-how, and skills that provide insight into a market and its customers.
Answer: FALSE
opportunities.
14) Market research, such as surveys, has limited effectiveness because it is often difficult for
customers to articulate the underlying problems they have with a product or service.
Answer: TRUE
opportunities.
33
15) The period of time when the environment is favorable for entrepreneurs to exploit a
particular new entry is called the window of opportunity.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 03-04 To be able to assess the attractiveness of a new entry opportunity.
16) The longer the entrepreneur takes to research a new entry, the less accurate customer demand
estimates are.
Answer: FALSE
17) When the window of opportunity is open, the environment is unfavorable for entrepreneurs
to exploit a new product or enter a new market with an existing product.
Answer: FALSE
18) An error of omission occurs from the decision not to act of a new entry opportunity when in
hindsight they should have.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 03-05 To acknowledge that entrepreneurship involves making decisions
under conditions of uncertainty.
19) An error of commission occurs from the decision not to act on a new entry opportunity.
Answer: FALSE
Difficulty: 1 Easy
34
20) The assessment of a new entry attractiveness is less about whether this opportunity "really"
exists or not and more about whether the entrepreneur believes he or she can make it work.
Answer: TRUE
21) The decision to exploit or not to exploit a new entry opportunity depends on whether the
entrepreneur has sufficient information, and on whether the window of opportunity is still open.
Answer: TRUE
22) First movers can monitor changes in the market that might be difficult or impossible to detect
for those firms not participating in the market.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 03-06 To be able to assess the extent of first-mover advantages and weigh
them against first-mover disadvantages.
23) If there is a poor fit between its resources and the external environment, then the firm will
not enjoy superior performance.
Answer: TRUE
24) Key success factors are the requirements that any firm must meet to successfully compete in
a particular industry.
Answer: TRUE
Difficulty: 1 Easy
35
25) Emerging industries are industries that have been around for years but are just starting to
experience explosive growth.
Answer: FALSE
Difficulty: 1 Easy
26) Environmental changes are highly unlikely in emerging industries.
Answer: FALSE
Difficulty: 1 Easy
27) By overestimating demand, the entrepreneur will suffer the costs of undercapacity.
Answer: FALSE
28) Entrepreneurs that delay entry have the advantage of more information about market
demand.
Answer: TRUE
29) Technological uncertainty is eliminated by a superior technology.
Answer: FALSE
36
30) Adaptations necessary to meet changes in market demand are difficult because an
organization resists change.
Answer: TRUE
31) Customers always embrace change in products and services.
Answer: FALSE
Difficulty: 1 Easy
32) To overcome customer uncertainty, the venture should educate customer through
demonstration and documentation on how to use the product.
Answer: TRUE
33) The late mover is able to operate in the industry for a grace period under conditions of
limited competition.
Answer: FALSE
34) Building customers' switching costs decreases barriers to entry for other firms.
Answer: FALSE
Difficulty: 1 Easy
37
35) Competition within an industry always has a negative effect on industry growth.
Answer: FALSE
36) A narrow scope strategy offers a small product range to a small number of customer groups.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 03-07 To understand that risk is associated with newness, but there are
strategies that the entrepreneur can use to reduce risk.
37) Using a broad scope strategy helps to reduce the risk of market uncertainty.
Answer: TRUE
38) A narrow scope strategy is better than a broad scope strategy in an environment high in
uncertainty.
Answer: FALSE
39) If a company has a superior product, customers will always be willing to pay a higher price
for higher value.
Answer: FALSE
38
40) A narrow scope strategy reduces the risks associated with competition.
Answer: TRUE
41) Imitation of other products increases the risk of downside loss associated with new entry.
Answer: FALSE
42) Franchising is an example of a new entry strategy that increases the risk of downside loss for
the franchisees.
Answer: FALSE
43) A "me-too" strategy consists of copying products that already exist and attempting to build
an advantage through minor variations.
Answer: TRUE
Difficulty: 1 Easy
44) The three major risk reduction strategies discussed in the text are narrow scope, broad scope
and imitation.
Answer: FALSE
39
45) Lack of informal communication systems is one of the assets of newness.
Answer: FALSE
46) A new entry includes all of the following except:

A) offering a new product to a new market
B) offering an established product to an new market
C) creating a new brand name for your company
D) creating a new organization
Answer: C
Difficulty: 1 Easy
new entry.
47) The set of decisions, actions, and reactions that first generate, and then exploit over time, a
new entry is:
A) entrepreneurial financing.
B) entrepreneurial strategy.
C) bootstrapping.
D) informal organization.
Answer: B
Difficulty: 1 Easy
new entry.
48) Which of the following is not one of the three key stages of an entrepreneurial strategy?
A) The generation of a new entry opportunity
B) Risk reduction strategies
C) A feedback loop
D) The exploitation of a new entry opportunity
Answer: B
new entry.
40
49) The basic building blocks to a firm, or the inputs into the production process, are:
A) competition.
B) strategy.
C) liabilities.
D) resources.
Answer: D
50) To be the basis of a firm's superior performance over competitors for an extended period of
time, valuable and rare resources need to be:
A) inimitable.
B) fully utilized.
C) patented.
D) shared.
Answer: A
51) ________ are used to protect the owner of the technology from people imitating the
technology.
A) Franchises
B) Switching costs
C) Patents
D) Distributors
Answer: C
41
52) Which of the following statements is true?
A) Knowledge is a valuable entrepreneurial resource that is gained through formal education.
B) Knowledge is easily communicated and common.
C) Knowledge based on experience is unlikely to be learned in a classroom.
D) Research, more than knowledge, leads to the generation of new entries in markets and
technologies.
Answer: C
opportunities.
53) ________ knowledge refers to the entrepreneur's possession of information, technology,

know-how, and skills that provide insight into the industry and customers.
A) Technological
B) Resource
C) Opportunity
D) Market
Answer: D
Difficulty: 1 Easy
opportunities.
54) Which is the best way to gain knowledge about a potential new entry?
A) Marketing research
B) Internet research
C) Entrepreneur's market experience and knowledge
D) Surveys
Answer: C
opportunities.
42
55) Technological knowledge:
A) is gained through market research.
B) can lead to a new product that is the basis for a new entry.
C) does not help unless the market applicability is obvious.
D) does not help if the market is limited.
Answer: B
opportunities.
56) When conducting research on a new entry:

A) the more information the entrepreneur has, the more difficult it is to focus on the consumer.
B) the entrepreneur must rely upon surveys more that market knowledge.
C) extensive research is expensive in terms of time and money.
D) lesser prior knowledge is advantageous since it minimizes the risk of entrepreneurial bias.
Answer: C
57) The window of opportunity is part of:

A) assessing the attractiveness of a new entry opportunity.
B) creating a resource bundle.
C) choosing an entry strategy.
D) choosing a risk reduction strategy.
Answer: A
58) The period of time when the environment is favorable for entrepreneurs to exploit a
particular new entry is the:
A) market research phase.
B) window of opportunity.
C) technology window.
D) narrow-scope strategy.
Answer: B
Difficulty: 1 Easy
43
59) The ________ is less about whether an opportunity really exists and more about whether the
entrepreneur believes they can make it work.
A) error of commission
B) window of opportunity
C) error of omission
D) assessment of a new entry's attractiveness
Answer: D
Difficulty: 1 Easy
60) An error of omission occurs when an entrepreneur:

A) enters a market but overestimates the customer demand.
B) develops a product for a market that is too narrow.
C) decides not to enter a market that is, in fact, desirable.
D) fails to understand the limitations of a market.
Answer: C
61) Regarding entry into a new market, which of the following is true?
A) First movers gain expertise through participation.
B) First movers are not able to detect changes in the market.
C) First movers suffer a cost disadvantage.
D) First movers face more competitive rivalry.
Answer: A
Difficulty: 1 Easy
44
62) First movers:
A) are not able to gain from moving down the experience curve.
B) are better positioned to satisfy customers.
C) face more competition than late movers.
D) fail to secure important channels.
Answer: B
Difficulty: 1 Easy
63) Which of the following is not a reason that first movers are better positioned to satisfy their
customers?
A) They have a chance to select and secure the most attractive segments of the market
B) They have the chance to position themselves at the center of the market
C) They have less uncertainty over the nature of the market
D) They have a chance to establish their product as the industry standard
Answer: C
64) A disadvantage of being a first mover is:

A) environmental instability.
B) cost disadvantages.
C) long lead time to gain knowledge.
D) a limited market.
Answer: A
45
65) If there is a good fit between the venture's bundle of resources and the external environment:
A) the firm will be rewarded with superior performance.
B) the entrepreneur will be unable to compete in the market segment.
C) environmental variables will be irrelevant.
D) demand uncertainty will be irrelevant.
Answer: A
66) In emerging industries:

A) environmental factors do not affect customer demand.
B) entrepreneurs confront demand certainty.
C) environmental changes are highly likely.
D) it is easier to respond effectively to sudden changes.
Answer: C
67) First movers face:

A) market rigidities.
B) high entry barriers.
C) cost disadvantages.
D) demand uncertainty.
Answer: D
Difficulty: 1 Easy
46
68) Later movers do not face:
A) entrenched competitors.
B) high growth markets.
C) lower market uncertainty.
D) reduced uncertainty over technologies.
Answer: B
69) By delaying entry, late movers:

A) can learn from the actions of first movers without incurring the same costs.
B) have less information about market demand.
C) secure the window of opportunity.
D) can avoid high entry barriers.
Answer: A
70) Technological uncertainty:

A) is a result of uncertainty about customer demand.
B) occurs because an alternative technology could be introduced by competitors.
C) only occurs in emerging markets.
D) can be avoided by early entrants with superior technology.
Answer: B
47
71) Changes needed to adapt to environmental changes:
A) are easier in established organizations because of inertia.
B) can be avoided by late entry.
C) are more difficult because of the tendency to escalate commitment.
D) don't affect smaller organizations.
Answer: C
72) The entrepreneurial attributes of persistence and determination, which are so beneficial when
the new venture is on the "right course,"
A) can make the entrepreneur more suitable to work in volatile markets.
B) can hasten the process of adapting to sudden changes.
C) can aid the entrepreneur in recognizing, and implementing changes.
D) can inhibit the ability of the entrepreneur to detect, and implement, change.
Answer: D
73) By entering a market later,

A) customer uncertainties have already been substantially reduced.
B) the venture can build a reputation as a "founder."
C) the company can erect barriers to entry and imitation.
D) the player gets to operate only for a grace period.
Answer: A
48
74) Customer uncertainty can take all of the following forms except:
A) not understanding how to use the product
B) not knowing whether the product will perform as expected
C) not knowing where to buy the product
D) being uncertainty adverse in general and resistant to change
Answer: C
75) By being first to market a product, the venture:

A) tends to lose customer loyalties to late entrants.
B) loses out to switching costs.
C) secures access to important sources of supply.
D) can sell its products and services at a higher price.
Answer: C
Difficulty: 1 Easy
76) The costs that must be borne by customers if they are to stop purchasing from the current
supplier and begin purchasing from another is:
A) customer switching costs.
B) lead time.
C) resource costs.
D) resource bundle errors.
Answer: A
Difficulty: 1 Easy
49
77) Lead time is:
A) the time from production to market delivery
B) the time in which the first mover operates in the market under conditions of limited
competition
C) the time it takes for an entrepreneur to go from the concept stage to the delivery stage
D) the time between product introduction and customer acceptance
Answer: B
Difficulty: 1 Easy
78) Barriers to entry include all of the following except:

A) patents
B) switching costs
C) environmental instability
D) building customer loyalties
Answer: C
79) Frequent flier miles would be an example of which barrier to entry?

A) Building customer loyalties
B) Securing access to supply of key resources
C) Creating product uniqueness
D) Building in switching costs
Answer: D
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80) ________ refers to the probability, and magnitude, of downside loss.
A) Reward
B) Risk
C) Liability of newness
D) Technology error
Answer: B
Difficulty: 1 Easy
81) Offering a small product range to a small number of customer groups is:
A) a narrow-scope strategy.
B) an imitation strategy.
C) a broad-scope strategy.
D) a way of reducing market uncertainties.
Answer: A
82) A narrow-scope market strategy:

A) does not provide the entrepreneur an opportunity to build up specialized knowledge and
expertise.
B) provides substantial protection against competitors.
C) is like putting all your eggs in one basket.
D) can be thought of as taking a "portfolio" approach to dealing with uncertainties.
Answer: C
51
83) A broad-scope market strategy:
A) focuses on producing customized products.
B) provides substantial protection against competitors.
C) is used to reduce market uncertainty.
D) is based primarily on product quality.
Answer: C
84) A broad-scope strategy:

A) is vulnerable to the risk that market demand does not materialize as expected and/or changes
over time.
B) opens the firm up to many different "fronts" of competition.
C) focuses the firm on producing customized products, localized business operations, and high
levels of craftsmanship.
D) offers a way of reducing some competition-related risks.
Answer: B
85) Imitation strategies:

A) require expensive and extensive research.
B) are rare and inimitable.
C) does not provide organizational legitimacy.
D) can enhance a firm's performance.
Answer: D
52
86) A ________ strategy that copies products that already exist and attempts to build an
advantage through minor variations.
A) technological
B) narrow scope
C) me-too
D) broad scope
Answer: C
Difficulty: 1 Easy
87) Which of the following is a liability of newness?

A) Costs associated with learning new tasks are high.
B) Lack of established routines and processes give the venture a new slate.
C) Communication in informal systems is increased.
D) Market for potential consumers is limited.
Answer: A
88) Franchising:
A) is the only imitation strategy discussed in the text.
B) reduces risk of downside loss.
C) is the same as the me-too strategy.
D) reduces the amount of competition an entrepreneur will face.
Answer: B
53
89) Identify and briefly describe the major stages of entrepreneurial strategy.
Answer: Three major stages:
Stage 1 New entry generation—The generation of a new entry is the result of a combination of
knowledge and other resources into a bundle that its creators hope will be valuable, rare, and
difficult for others to imitate. Depending on how in-depth the instructor wants the answer items
like market and technological knowledge, window of opportunity and error of
omission/commission may be required/discussed.
Stage 2 New entry exploitation—comprised of choosing an entry strategy, a risk reduction

strategy. Depending on how in-depth the instruction wants the answer items like first mover
advantages/disadvantages, demand and technological uncertainty, adaptation, lead time, and
narrow/broad scope strategies may be discussed.
Stage 3 Feedback loop of resources—a brief description is appropriate since not much time is
spent on this stage. Answer may include items from the following excerpt from the textbook:
"We should not underestimate the importance of the feedback loop of stage 3 because an
entrepreneur cannot rely on the generation and exploitation of only one new entry; rather, long-
run performance is dependent upon the ability to generate and exploit numerous new entries. If
the firm does rely on only one new entry, then as the life cycle for the product enters maturity
and declines, so goes the life cycle of the organization."
90) Explain what constitutes a new entry.
Answer: New entry refers to (1) offering a new product to an established or new market, (2)
offering an established product to a new market, or (3) creating a new organization (regardless of
whether the product or the market is new to competitors or customers).
Difficulty: 1 Easy
new entry.
54
91) Explain the difference between errors of omission and commission.
Answer: An error of commission occurs from the decision to pursue this new entry opportunity,
only to find out later that the entrepreneur had overestimated his or her ability to create customer
demand and/or to protect the technology from imitation by competitors. The costs to the
entrepreneur were derived from acting on the perceived opportunity.
An error of omission occurs from the decision not to act on the new entry opportunity, only to
find out later that the entrepreneur had underestimated his or her ability to create customer
demand and/or to protect the technology from imitation by competitors. In this case, the
entrepreneur must live with the knowledge that he let an attractive opportunity slip through his
fingers.
92) List the five main first-mover advantages and identify the three main disadvantages of being
a first-mover.
Answer: Advantages:
Cost advantages
Less competition
Secure important channels
Prime position for customers
Expertise from participation
Disadvantages:
Environmental instability
Customer uncertainty
Short lead time

55
93) When considering whether to be first to enter with a new product and/or into a new market,
entrepreneurs must assess whether the first-mover advantages outweigh the first-mover
disadvantages. Identify the three influences such an assessment depends on and briefly describe
each one.
Answer: Such an assessment depends on (1) the stability of the environment surrounding the
entry, (2) the ability of the entrepreneur to educate customers, and (3) the ability of the
entrepreneur to erect barriers to entry and imitation to extend the firm's lead time. A good fit
between a firm's bundle of resources and the external environment results in superior
performance. Entrepreneurs use key success factors to obtain a good fit but environmental
changes are highly likely in emerging industries. Environmental stability includes demand
uncertainty, technological uncertainty, and adaptation.
Offering a superior product is not sufficient to enable a first mover to make sales; the
entrepreneur must also reduce customer uncertainty. To do this, the entrepreneur can offer
informational advertising or through demonstration and documentation on how to use the
product.
Lead time can be extended if the first mover can erect barriers to entry. Important barriers to
entry are derived from relationships with key stakeholders, which may dissuade entry by
(potential) competitors. This can be done by: building customer loyalties, building switching
costs, protecting product uniqueness, and securing access to important sources of supply and
distribution.
56
94) The ability to obtain, and then recombine, resources into a bundle represents an important
entrepreneurial resource. Knowledge is the basis of this entrepreneurial resource. Briefly explain
knowledge in general as well as market and technological knowledge.
Answer: Knowledge is built up over time through experience, and it resides in the mind of the
entrepreneur and in the collective mind of management and employees. This sort of knowledge
is unlikely to be learned in a textbook or in a classroom. Knowledge that is particularly relevant
to the generation of new entries is that which is related to the market and technology.
Market knowledge refers to the entrepreneur's possession of information, technology, know-how,

and skills that provide insight into a market and its customers. This knowledge is deeper than the
knowledge that could be gained through market research.
Technological knowledge might lead to a technology that is the basis for a new entry, even
though its market applicability is unobvious. This knowledge has led to technological
advancement that in many ways has created new markets rather than generating a technology to
satisfy an unmet market need.
opportunities.
57
95) Identify and describe the three major risk reduction strategies.
Answer:
A. Narrow scope—A narrow-scope strategy offers a small product range to a small number of
customer groups to satisfy a particular need. The narrow scope can reduce the risk that the firm
will face competition with larger, more established firms in a number of ways. A narrow-scope
strategy focuses the firm on producing customized products, localized business operations, and
high levels of product quality. By focusing on a specific group of customers, the entrepreneur
can build up specialized expertise and knowledge that provide an advantage over companies that
are competing more broadly. The high end of the market typically represents a highly profitable
niche.
B. Broad scope—broad-scope strategy can be thought of as taking a "portfolio" approach to

dealing with uncertainties about the attractiveness of different market segments. By offering a
range of products across many different market segments, the entrepreneur can gain an
understanding of the whole market by determining which products are the most profitable.
Unsuccessful products (and market segments) can then be dropped and resources concentrated
on those product markets that show the greatest promise. In essence, the entrepreneur can cope
with market uncertainty by using a broad-scope strategy to learn about the market through a
process of trial and error.
C. Imitation strategies—Imitation is another strategy for minimizing the risk of downside loss
associated with new entry. Imitation involves copying the practices of other firms, whether those
other firms are in the industry being entered or from related industries. Entrepreneurs may
simply find it easier to imitate the practices of a successful firm than to go through the process of
a systematic and expensive search that still requires a decision based on imperfect information.
In essence, imitation represents a substitute for individual learning. Imitating some of the
practices of established successful firms can help the entrepreneur develop the skills necessary to
be successful in the industry, rather than attempting to work out which skills are required and
develop these skills from scratch. Imitation also provides organizational legitimacy. If the
entrepreneur acts like a well-established firm, it is likely to be perceived by customers as well
established. Imitation is a means of gaining status and prestige. Customers feel more comfortable
doing business with firms that they perceive to be established and prestigious.
58
96) When assessing whether a new product and/or new market are sufficiently attractive to be
worth exploiting and developing, an entrepreneur partly depends on the level of information
available on a new entry. Why is prior knowledge important and what are the limits of an
information search? Also, briefly define a window of opportunity.
Answer: More prior knowledge means that the entrepreneur starts from a position of less
ignorance about the assessment task at hand. Less information needs to be collected to reach a
threshold where the entrepreneur feels comfortable making a decision to exploit or not to exploit.
Knowledge can be increased by searching for information and the search is streamlined by prior
knowledge. Costs associated with searching for additional information include both money and
time.
The window of opportunity is the period of time when the environment is favorable for
entrepreneurs to exploit a particular new entry. When the window is open, the environment is
favorable to exploit a particular new product or to enter a new market. Once the window of
opportunity is closed, the environment for exploitation is unfavorable. While more information is
desirable, the time spent collecting additional information increases the likelihood that the
window of opportunity will close.
97) Explain the three major causes of "liabilities of newness."
Answer:
 New organizations face costs in learning new tasks. It may take some time and
training to customize employees' skills to the new tasks they are asked to perform.
 As people are assigned to the roles of the new organization, there will be some
overlap or gaps in responsibilities. This will often cause conflict until the
boundaries around particular roles are more formally set (once management has
gained sufficient knowledge to do so) and/or until they have been informally
negotiated by the parties to the conflict.
 Communication within the organization occurs through both formal and informal
channels. A new organization has not yet had the opportunity to develop informal
structures, such as friendships and organizational culture. It takes time for a new
firm to establish these informal structures.
59
Chapter 4 Creativity and the Business Idea
1) Augmented reality, body monitoring, and point of view reference are all trend categories in
the wearable tech industry.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 04-01 To identify various sources of ideas for new ventures.
2) Trends often provide one of the greatest opportunities for starting a new venture.
Answer: TRUE
Difficulty: 1 Easy
3) Members of the distribution channel are usually good sources of ideas for new products.
Answer: TRUE
4) The files of the U.S. Patent Office are kept confidential and entrepreneurs cannot study their
contents.
Answer: FALSE
5) The largest source of new ideas is the U.S. Patent Office.
Answer: FALSE
Difficulty: 1 Easy
60
6) Focus groups consist of 15 to 25 participants in a loosely structured, freewheeling
atmosphere.
Answer: FALSE
Learning Objective: 04-02 To discuss methods for generating new venture ideas.
7) The focus group is an excellent method for initially screening ideas and concepts.
Answer: TRUE
8) Most of the ideas generated by a brainstorming group progress into further development.
Answer: FALSE
9) The drawback with problem inventory analysis is that it is not effective in relating known
products to suggested problems.
Answer: FALSE
10) Results from product inventory analysis need minimal evaluation as they most likely reflect a
new business opportunity.
Answer: FALSE
11) Brainwriting is a written form of brainstorming.
Answer: TRUE
Difficulty: 1 Easy
61
12) Creativity tends to decrease with age.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 04-03 To discuss creativity and creative problem solving techniques.
13) Brainstorming is an unstructured process used for generating possible ideas about a problem
within a limited time frame through the spontaneous contributions of participants.
Answer: TRUE
Difficulty: 1 Easy
14) In reverse brainstorming the focus is on all the things that are right about an idea.
Answer: FALSE
Difficulty: 1 Easy
15) The Gordon method, like most other methods, begins with group members not knowing the
exact nature of the problem.
Answer: FALSE
16) In the checklist method, a new idea is developed through a list of related issues or
suggestions.
Answer: TRUE
Difficulty: 1 Easy
17) Developing a new idea through a chain of word associations is known as the checklist
method.
Answer: FALSE
Difficulty: 1 Easy
62
18) Forced relationships is a method of forcing confrontations in focus groups.
Answer: FALSE
19) The collective notebook method involves members recording their ideas at least once a day
for about a week.
Answer: TRUE
Difficulty: 1 Easy
20) Attribute listing is an idea-finding technique that requires the entrepreneur to list the
attributes of an item or problem and then look at each from a variety of viewpoints.
Answer: TRUE
21) In parameter analysis a new idea is developed through a list of related issues or suggestions.
Answer: FALSE
22) Using the big-dream approach, a new idea is developed through a list of related issues or
suggestions.
Answer: FALSE
23) The big-dream approach requires the entrepreneur to dream about the problem and its
solution, thinking big.
Answer: TRUE
Difficulty: 1 Easy
63
24) Creative synthesis is closely connected to the technique of parameter analysis.
Answer: TRUE
25) Nanotechnology would be classified as a breakthrough technology.
Answer: TRUE
Difficulty: 1 Easy
Learning Objective: 04-04 To discuss the importance of innovation.
26) The product Spanx is an example of an ordinary innovation.
Answer: TRUE
27) New products may be classified from the viewpoint of either the consumer or the firm.
Answer: TRUE
28) Discontinuous innovations have the least disrupting influence on established consumption
patterns.
Answer: FALSE
Difficulty: 1 Easy
29) When a firm classifies a new product the two key factors used are market and technology
newness.
Answer: TRUE
64
30) The entrepreneur's ability to recognize a business opportunity is a result of his or her
knowledge and experience.
Answer: TRUE
Learning Objective: 04-05 To understand and be able to develop an opportunity assessment
plan.
31) Entrepreneurs are unable to carefully assess each and every innovative idea and opportunity.
Answer: FALSE
plan.
32) The product life cycle consists of five main stages.
Answer: FALSE
Learning Objective: 04-06 To discuss the aspects of the product planning and development
process.
33) One evaluation method successfully used in the concept stage is the systematic market
evaluation checklist.
Answer: FALSE
process.
34) In the concept stage, the refined idea is tested to determine consumer acceptance.
Answer: TRUE
process.
65
35) In the test market stage of product planning, the refined product idea is tested to determine
customer acceptance.
Answer: FALSE
process.
36) Only the test marketing phase of product planning provides actual sales results to judge the
product's customer appeal.
Answer: TRUE
process.
37) In the product development stage, consumer reaction to the physical product/service is
determined.
Answer: TRUE
process.
38) The entrepreneur should always design and build his own webpage to maintain strategic
control.
Answer: FALSE
Learning Objective: 04-07 To discuss aspects of e-commerce.
39) An online company's front-end operations involve integration of customer orders with
distribution channels.
Answer: FALSE
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40) Trends for the next decade include all of the following except:
A) Green products
B) New age music
C) Clean energy
D) Health Maintenance
Answer: B
Difficulty: 1 Easy
41) Which of the following statements is true?

A) Customers form the largest source of new ideas for entrepreneurs.
B) While members of the distribution channel may be willing to provide new ideas for
entrepreneurs, they may not help market them.
C) The Federal Government is not a source of new ideas since the patent information they collect
is confidential.
D) Potential entrepreneurs should establish a formal method for monitoring and evaluating
competitive products and services on the market.
Answer: D
42) Patents filed with the U.S. Patent Office:

A) are not disclosed to the public.
B) are the property of the U.S. Government.
C) frequently suggest other new products.
D) are only accessible to government agencies.
Answer: C
67
43) The Occupational Safety and Health Act (OSHA) mandated that first-aid kits be available in
business establishments employing more than three people. A newly formed company was
successful in developing first-aid kits that allowed companies to comply with the standards of the
act. This is an example of:
A) distribution channels as an excellent source for new ideas.
B) existing products and services as a source for new ideas.
C) potential consumers as a source for new ideas.
D) government regulations as a source for new product ideas.
Answer: D
44) The largest source of new product ideas is:

A) the U.S. Patent Office.
B) the entrepreneur's research and development.
C) customers.
D) the federal government.
Answer: B
45) Focus groups use which of the following methods?

A) A moderator leads the group in an open, in-depth discussion.
B) A moderator asks each individual in the group questions, interview style.
C) Each participant fills out a questionnaire, followed by individual exit interviews.
D) Each participant obtains new ideas and solutions by focusing on problems.
Answer: A
46) Brainstorming groups should:

A) contain an expert in the field to be discussed.
B) be serious and work-oriented.
C) try to generate as many ideas as possible.
D) encourage criticism of ideas from other participants in the group.
Answer: C
68
47) ________ is not desirable when brainstorming is in process.
A) "Freewheeling"
B) Idea combination and improvement
C) Generating a large quantity of ideas
D) Criticism
Answer: D
48) In this method, instead of generating new ideas themselves, consumers are provided with a
list of problems in a general product category.
A) Reverse brainstorming
B) Problem inventory analysis
C) Brainstorming
D) Focus groups
Answer: B
49) Creativity declines with:

A) training and tradition.
B) education and work experience.
C) age, education, lack of use, and bureaucracy.
D) mental health and work experience.
Answer: C
50) Probably the most well-known and widely used technique for creative problem solving is:
A) brainstorming.
B) focus groups.
C) forced relationships.
D) scientific method.
Answer: A
69
51) Reverse brainstorming is much like brainstorming except that:
A) criticism is not allowed.
B) the technique is based on finding solutions.
C) the group need not be careful to maintain good morale.
D) the process usually involves identification of everything wrong with an idea.
Answer: D
52) Which of the following problem-solving techniques begins with group members not knowing
the exact nature of the problem?
A) Parameter analysis
B) Matrix charting
C) The Gordon method
D) Free association
Answer: C
53) In the ________ method a new idea is developed through a list of related issues or
suggestions.
A) Gordon
B) checklist
C) collective notebook
D) matrix charting
Answer: B
54) In the ________ method, a word is written down, then another, creating a chain of ideas.
A) reverse brainstorming
B) matrix charting
C) heuristic
D) free association
Answer: D
70
55) Which of the following creative methods involves having participants write down their ideas
several times a day?
A) Collective notebook method
B) Parameter analysis
C) Brainstorming
D) Forced relationship
Answer: A
56) This problem-solving method requires the entrepreneur to list the properties of an item or
problem and then look at each from a variety of viewpoints.
A) Value analysis
B) Attribute listing
C) Brainwriting
D) Big-dream approach
Answer: B
57) This problem-solving method involves developing new ideas by thinking without
constraints.
A) Value analysis
B) Attribute listing
C) Big-dream approach
D) Brainwriting
Answer: C
71
58) Creative synthesis is an important aspect of the ________ method of creative problem
solving.
A) brainwriting
B) forced association
C) attribute listing
D) parameter analysis
Answer: D
59) Parameter analysis consists of two main aspects that are:

A) creative synthesis and parameter identification.
B) breakthrough innovation and forced association.
C) attribute listing and parameter identification.
D) parameter variation and verification.
Answer: A
60) What type of innovation is illustrated by the ideas of the airplane and penicillin?
A) Ordinary innovation
B) Continuous innovation
C) Technological innovation
D) Breakthrough innovation
Answer: D
61) Which of the following was not discussed in the text as a breakthrough innovation?
A) The airplane
B) The Internet
C) Spanx
D) Penicillin
Answer: C
72
62) Which of the following is defined as having some disruptive influence on established
consumption patterns?
A) Continuous Innovations
B) Dynamically Continuous Innovations
C) Discontinuous Innovations
D) Breakthrough Innovations
Answer: B
63) Continuous innovations are described as:

A) having the least disrupting influence on established consumption patterns.
B) having some disruptive influence on established consumption patterns.
C) having no disruptive influence on established consumption patterns.
D) having to establish new consumption patterns due to the creation of a previously unknown
product.
Answer: A
64) The opportunity recognition process contains all of the following except:
A) work experience
B) reformation
C) entrepreneurial alertness
D) networks
Answer: B
plan.
73
65) The ________ is defined as the stages each product goes through from introduction to
decline.
A) entrepreneurial decision making process
B) test marketing process
C) product planning and development process
D) product life cycle
Answer: D
process.
66) How many stages are in the product planning and development process?
A) Two
B) Three
C) Four
D) Five
Answer: D
process.
67) In what stage would you use the systematic market evaluation checklist?
A) Idea stage
B) Concept stage
C) Product development stage
D) Commercialization stage
Answer: A
process.
74
68) In the idea stage of the product planning and development process:
A) conversational interviewing is used.
B) product samples are given out.
C) systematic market evaluation is used.
D) multiple brand comparison is used.
Answer: C
process.
69) In what stage would it be most beneficial to use conversational interviews?

A) Idea stage
B) Concept stage
Answer: B
process.
70) In which stage of the product planning and development process would it be appropriate to
give product samples to a panel of potential customers?
A) Idea stage
B) Concept stage
Answer: C
process.
75
71) The stage in the product planning and development process in which actual sales results are
available is the:
A) idea stage.
B) concept stage.
C) product development stage.
D) test marketing stage.
Answer: D
process.
72) Which of the following statements is true of mobile-optimized websites?

A) It is important to include all core features and content from the web-optimized site.
B) Decrease the size of interface elements.
C) Internet connectivity is typically faster than a web-optimized site.
D) The key is to know your audience and the nature of the device they are using.
Answer: D
76
73) Discuss both the Gordon method and Forced Relationship creative problem solving
techniques.
Answer:
A. Gordon method—unlike many other creative problem-solving techniques, begins with group
members not knowing the exact nature of the problem. This ensures that the solution is not
clouded by preconceived ideas and behavioral patterns. The entrepreneur starts by mentioning a
general concept associated with the problem. The group responds by expressing a number of
ideas. Then a concept is developed, followed by related concepts, through guidance by the
entrepreneur. The actual problem is then revealed later, enabling the group to make suggestions
for implementation or refinement of the final solution.
B. Forced relationships—is the process of forcing relationships among some product

combinations. It asks questions about objects or ideas in an effort to develop a new idea. The
new combination and concept is developed through a five-step process:
1. Isolate the elements of the problem.
2. Find the relationships between these elements.
3. Record the relationships in an orderly form.
4. Analyze the resulting relationships to find ideas or patterns.
5. Develop new ideas from these patterns.

77
74) Briefly summarize the five fruitful sources of new ideas for entrepreneurs discussed in the
textbook.
Answer: Some of the more fruitful sources of new ideas for entrepreneurs include: consumers,
existing products and services, distribution channels, the federal government, and research and
development.
Potential entrepreneurs should pay close attention to potential customers. This can take the form
of informally monitoring potential ideas and needs or formally arranging for consumers to have
an opportunity to express their opinions. Potential entrepreneurs should also establish a method
for monitoring and evaluating competitive products/services on the market. Frequently, this
analysis uncovers ways to improve on these competitive offering that may result in a new
product/service that has more market appeal, sales, and profit potential.
Members of the distribution channels are also good sources for new ideas reflecting their
familiarity with the needs of the market. Not only do channel members frequently have
suggestions for completely new products, but they can also help in marketing the entrepreneur's
newly developed products.
The federal government can also be a source of new product ideas in two ways. First, the files of
the Patent Office frequently suggest other more feasible product ideas. Second, new product
ideas can evolve in response to government regulations.
The largest source of new ideas is the entrepreneur's own research and development efforts,
which may be a formal endeavor connected with current employment or an informal one in a
basement or garage.
78
75) E-commerce offers the entrepreneur the opportunity to be very creative and innovative and e-
commerce continues to increase on an annual basis. Discuss the three broad e-commerce
channels that companies offer to consumers. There are three e-commerce channels that
companies offer to consumers: traditional website, dedicated mobile-enabled websites and
mobile apps.
Answer: In developing a website, the most important questions is: who is the audience? User
complaints are fairly consistent: problems with text legibility, task flow, links to privacy and
security policies, and use of space.
The key to a mobile-optimized site is to know your audience and the nature of the device they
are using. Three key guidelines when adapting a web-optimized site to a mobile-optimized site:
Cut features to eliminate things that are not core to the mobile use case; Cut content to reduce
word count and defer secondary information to secondary pages; and Enlarge interface elements
to accommodate the "fat finger" problem.
Mobile apps are computer programs developed for Smartphones that can be downloaded from an
online store. There are at least three benefits to having a dedicated app: streamlined customer
experience, new methods of engaging different audiences, and general visibility.
76) Identify and describe the three major types of innovation.
Answer:
A. Breakthrough—fewest in number, protection is important via patents, trademarks, copyrights,
examples given by the text include: penicillin, the steam engine, the computer, the airplane, the
automobile, the Internet, and nanotechnology.
B. Technological—occurs more frequently than breakthrough innovation and in general is not at

the same level of scientific discovery and advancement. These are very meaningful innovations,
as they do offer advancements in the product/market area. As such, they usually need to be
protected. Such innovations as the personal computer, the flip watch for containing pictures,
voice and text messaging, and the jet airplane are examples of technological innovations.
C. Ordinary—occurs most frequently, these more numerous innovations usually extend an

existing innovation into a better product or service or one that has a different—usually better—
market appeal. These innovations usually come from market analysis and pull, not technology
push. In other words, the market has a stronger effect on the innovation (market pull) than the
technology (technology push). One ordinary innovation (Spanx) was developed by Sara Blakely,
who wanted to get rid of unsightly panty lines. Examples used Spanx and gloves/slippers for
yoga.
79
77) List, in order, the stages of the product planning and development process.
Answer:
1. Idea
2. Concept
3. Product Development
4. Test marketing stage
5. Commercialization stage
Difficulty: 1 Easy
process.
80

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Entrepreneurship, 11e (Hisrich)

Chapter 1 The Entrepreneurial Mind-Set

2) Entrepreneurial thinking partly is about reducing doubt as to whether an opportunity for

7) In the McMullen-Shepherd Model first-person opportunity beliefs come before third-person

8) Sustainable entrepreneurship provides only environmental gains for others.

11) Bricolage is entrepreneurs making do by applying combinations of the resources at hand to

25) Previous start-up experience is a good predictor of starting subsequent businesses.

32) In Stage One of the McMullen-Shepherd Model:

33) In Stage Two of the McMullen-Shepherd Model:

35) The causal process of thinking:

42) On the education background, entrepreneurs:

Structural similarities were identified as the most challenging.

Answer: Sustainable entrepreneurship focuses on preserving nature, life support, and

Economic gains for others include employment opportunities, improved access to

1) Developing a spirit of entrepreneurship within the existing organization, called corporate

2) Entrepreneurial endeavors consist of new business venturing, innovativeness, self-renewal,

3) Corporate entrepreneurship is most strongly reflected in entrepreneurial activities as well as in

10) Traditionally managed firms typically punish failure.

13) In creating a culture for corporate entrepreneurship leadership is important.

24) Generally, independent, venture-capital-based start-ups by entrepreneurs tend to outperform

27) An entrepreneur's recovery from grief is detrimental to society.

34) Having an entrepreneurial orientation toward the control of resources means:

37) Which of the following is true about corporate entrepreneurship?

38) Which of the following is not a leadership characteristic of a corporate entrepreneur

43) Which of the following is true?

Answer: 1. New business venturing: These entrepreneurial activities consist of creating

2. Organizational innovativeness refers to product and service innovation. It includes new

Answer: Eight areas of difference students can choose from:

TABLE 2.1 Distinguishing Entreprenuerially from Traditionally Managed Firms

Entreprenuerial Focus Conceptual Dimension Administrative Focus

Driven by perception of Strategic orientation Driven by controlled resources

Episodic use or rent of required Control of resources Owndership or eo\mployment of

Flat with multiple informal Management structure Hierarchy

Based on value creation Reward philosophy Based on responsibility and

Promoting broad search for Entrepreneurial culture Opportunity search restricted by

TABLE 2.3 Characteristics of an Entrepreneurial Environment

 Organization operates on frontiers of technology

Answer: Answers will vary.

52) An organization wanting to establish a more entrepreneurial firm must implement a

restoration orientation An approach to negative emotions based on both avoidance and a

5. Recovery from loss offers an opportunity to increase one's knowledge of entrepreneurship.

4) Newness of a new entry is always an advantage.

9) Knowledge is the basis of the entrepreneurial resource.

13) Technological knowledge refers to the entrepreneur's possession of information, technology,

26) Environmental changes are highly unlikely in emerging industries.

29) Technological uncertainty is eliminated by a superior technology.

31) Customers always embrace change in products and services.

46) A new entry includes all of the following except:

53) ________ knowledge refers to the entrepreneur's possession of information, technology,

56) When conducting research on a new entry:

57) The window of opportunity is part of:

60) An error of omission occurs when an entrepreneur:

64) A disadvantage of being a first mover is:

66) In emerging industries:

67) First movers face:

69) By delaying entry, late movers:

70) Technological uncertainty:

73) By entering a market later,

75) By being first to market a product, the venture:

78) Barriers to entry include all of the following except:

79) Frequent flier miles would be an example of which barrier to entry?

82) A narrow-scope market strategy:

84) A broad-scope strategy:

85) Imitation strategies:

TB CH1,2,3&4

TB CH1,2,3&4