Chapter 1: Entrepreneurship: Evolutionary Development-Revolutionary Impact

CHAPTER 1: ENTREPRENEURSHIP: EVOLUTIONARY
DEVELOPMENT-REVOLUTIONARY IMPACT
TRUE/FALSE
1. Entrepreneurs are aggressive catalysts for change within the marketplace.
ANS: T PTS: 1
NAT: AACSB Reflective Thinking | Individual Dynamics
2. Entrepreneurs are not heroes in today’s marketplace.
ANS: F PTS: 1
3. Entrepreneurs are the major source of innovation and job creation in any economy.
ANS: T PTS: 1
4. Entrepreneurship is more than the mere creation of a business.
ANS: T PTS: 1
5. During the past ten years, new business incorporations averaged nearly 600,000 per year.
ANS: T PTS: 1
6. One of every 1,000 adults participates in the founding of a new firm every year.
ANS: F PTS: 1
7. The entrepreneurial spirit is unique to America and Western Europe.
ANS: F PTS: 1
8. A “gazelle” is a business establishment with at least 20 percent sales growth every year for five years.
ANS: T PTS: 1
9. Gazelles produce half the innovations per employee that larger firms typically do.
ANS: F PTS: 1
10. New and smaller firms obtain more patents per sale than do larger firms.
ANS: T PTS: 1
11. Gazelles produced 5 million jobs despite the continual downsizing in major corporations over the
last decade.
ANS: T PTS: 1
12. New and smaller firms are responsible for 95 percent of all radical innovations.
ANS: T PTS: 1
13. Gazelles are almost always high tech.
ANS: F PTS: 1
14. Gazelles do not always get venture capital funding.
ANS: T PTS: 1
15. Three characteristics of an entrepreneur are personal initiative, management skills, and a desire
for autonomy.
ANS: T PTS: 1
16. Large firms, as opposed to entrepreneurs, are the aggressive catalyst for change in the world
of business.
ANS: F PTS: 1
17. The word entrepreneur is derived from the Spanish word entreprendre, meaning “to undertake.”
ANS: F PTS: 1
18. There is no single definition of an entrepreneur.
ANS: T PTS: 1
19. Recognition of entrepreneurs dates back to the French economist Richard Cantillon.
ANS: T PTS: 1
20. Entrepreneurs are the major source of innovation and job creation in the economy.
ANS: T PTS: 1
21. According to Robert C. Ronstadt, entrepreneurship is the process of creating incremental wealth.
ANS: T PTS: 1
22. Most entrepreneurs are inventors.
ANS: F PTS: 1
23. An entrepreneur needs neither a lot of money nor luck.
ANS: T PTS: 1
24. Prepared entrepreneurs who seize opportunities when they arise often appear to be lucky.
ANS: T PTS: 1
25. Entrepreneurs are high risk takers.
ANS: F PTS: 1
26. Entrepreneurs always start their business at a young age.
ANS: F PTS: 1
27. Characteristics of entrepreneurs can neither be taught nor learned.
ANS: F PTS: 1
28. Entrepreneurs are born not made.
ANS: F PTS: 1
29. Entrepreneurs are doers not thinkers.
ANS: F PTS: 1
30. Entrepreneurs must fit the “profile.”
ANS: F PTS: 1
31. Entrepreneurs are often very methodical people who plan their moves very carefully.
ANS: T PTS: 1
32. The “corridor principle” states that entrepreneurs often get stuck on one idea.
ANS: F PTS: 1
33. Entrepreneurs are often known as calculated risk takers, as opposed to “gamblers.”
ANS: T PTS: 1
34. The macro view of entrepreneurship includes external processes that are sometimes beyond the
control of the entrepreneur.
ANS: T PTS: 1
35. The displacement school of thought focuses on the negative side of group phenomena.
ANS: T PTS: 1
36. The strategic formulation school of thought emphasizes the planning process in successful
venture development.
ANS: T PTS: 1
37. In the environmental school of thought, legal issues surrounding the natural environment are primary.
ANS: F PTS: 1
38. The financial/capital entrepreneurial school of thought focuses on the potential profit of the
business idea.
ANS: F PTS: 1
39. Political, cultural, and economic displacement are all part of the displacement school
of entrepreneurial thought.
ANS: T PTS: 1
40. “Great chef” strategies focus on unique markets.
ANS: F PTS: 1
41. Entrepreneurship involves an interdisciplinary approach.

ANS: T PTS: 1
42. The four major dimensions considered in the dynamic states approach are the individual,
the environment, the organization, and the process.
ANS: F PTS: 1
MULTIPLE CHOICE
1. Entrepreneurs are best characterized as:

a. aggressive catalysts for change
b. good managers
c. hard to get along with
d. not fitting in to an ordinary workplace
ANS: A PTS: 1
2. During the past ten years, there were approximately how many business incorporations per year?
a. 600,000
b. 500,000
c. 700,000
d. 1 million
ANS: A PTS: 1
3. Entrepreneurs will always be

a. a key factor in the stability of the small business sector
b. hindered by lack of funding
c. the major source of job creation and innovation in any economy
d. a little quirky
ANS: C PTS: 1
4. In the evolutionary process of economic growth, _________ plays the crucial and indispensable role
of providing the “social glue” that binds together both high-tech and “Main Street” activities.
a. entrepreneurship
b. supply and demand
c. the Internet
d. management
ANS: A PTS: 1
5. Entrepreneurs and gazelles have been credited with making disproportionate contributions to all
but which of the following?
a. innovation
b. job creation
c. economic renewal
d. unemployment
ANS: D PTS: 1
6. Which of the following statements best describes a “gazelle?”

a. a business with at least 20 percent growth every year
b. a business with no sales growth
c. a business that has acquired numerous firms
d. an inventor who turned business person
ANS: A PTS: 1
7. Gazelles have been responsible for which of the following:

a. some job growth
b. 55 percent of innovations
c. 30 percent of all radical innovations
d. most job turnover
ANS: B PTS: 1
8. ______________ is the economic basis for all entrepreneurial activity.

a. Individuality
b. Capitalism
c. Voodoo economics
d. Free enterprise
ANS: D PTS: 1
9. The word entrepreneur is derived from the French entreprendre, which is translated as
a. to apprehend
b. to undertake
c. to compete
d. to enter and dare
ANS: C PTS: 1
10. The entrepreneur is one who

a. dreams all day.
b. manages.
c. oversees manufacturing.
d. invents new products.
ANS: B PTS: 1
11. Which of the following characteristics is most important to an entrepreneur?

a. management skills
b. neatness
c. friendliness
d. having a nice office.
ANS: A PTS: 1
12. The study of entrepreneurship is
a. based on the field of management
b. based on the field of accounting
c. based on the field of sociology
d. interdisciplinary
ANS: D PTS: 1
13. Which economist first associated the “risk bearing” activity in the economy with the entrepreneur?
a. Richard Cantillon
b. Robert C. Ronstadt
c. Peter F. Drucker
d. Jean Baptiste Say
ANS: A PTS: 1
14. Which is not one of the chief characteristics of an entrepreneur?

a. personal initiative
b. ability to consolidate resources
c. risk taking
d. desire for control of people
ANS: D PTS: 1
15. Entrepreneurial traits include which of the following?

a. salesmanship
b. initiative
c. wealth
d. edginess
ANS: B PTS: 1
16. Robert C. Ronstadt put together a summary definition of entrepreneur that included which of
the following key phrases?
a. the acceptance of risk of failure
b. the dynamic process of creating incremental wealth
c. the advantage of economic endowments
d. the phenomenon of leadership
ANS: B PTS: 1
17. Which of the following concepts is entrepreneurship considered synonymous with?

a. free enterprise
b. socialism
c. multimillion dollar enterprises
d. partnership
ANS: A PTS: 1
18. Which is a true statement about entrepreneurs?
a. Entrepreneurs are doers and thinkers.
b. All you need is money to be an entrepreneur.
c. Ignorance is bliss for an entrepreneur.
d. Inheriting a business is the best way to become an entrepreneur.
ANS: A PTS: 1
19. Throughout the years, many myths have arisen about entrepreneurship as a result of?
a. a lack of research about entrepreneurship
b. a lack of interest in the field
c. a total disregard for the truth
d. a destructive attitude by government
ANS: A PTS: 1
20. The “corridor principle” is best described by which of the following statements?
a. If at first you don’t succeed, try, try, again.
b. Being in the right place at the right time.
c. With every new venture launched, new and unintended opportunities arise.
d. Luck happens when preparation meets opportunity.
ANS: C PTS: 1
21. Which of the following traits is not that of an entrepreneur?

a. drive
b. shyness
c. willingness to take risks
d. human relations skills
ANS: B PTS: 1
22. Which of the following is not a common myth about entrepreneurs?

a. Entrepreneurs are academic and social misfits.
b. Entrepreneurs are doers, not thinkers.
c. Entrepreneurs today are considered heroes.
d. All you need is money to be an entrepreneur.
ANS: C PTS: 1
23. Which statement is not true?

a. Luck happens when preparation meets opportunity.
b. Entrepreneurs fare poorly in today’s hypercompetitive market.
c. Failure due to lack of proper financing often is an indicator of other problems.
d. It takes more than just money to be a successful entrepreneur.
ANS: B PTS: 1
24. Most entrepreneurs should be categorized as

a. inventors
b. innovators
c. lucky
d. wealthy
ANS: B PTS: 1
25. Which of the following statements is true?

a. Entrepreneurship is the ability to create and build a vision from practically nothing.
b. Entrepreneurship is pure luck.
c. Entrepreneurship is simply obtaining financing and starting a business.
d. Entrepreneurship has nothing to do with creating incremental wealth.
ANS: A PTS: 1
26. Which of the following economists wrote about entrepreneurship and its impact on
economic development?
a. Richard Dailey
b. Joseph Schumpeter
c. Paul Samuelson
d. Robert McConnell
ANS: B PTS: 1
27. Entrepreneurship has become synonymous or closely linked with:

a. failure
b. socialism and monopolies
c. multimillion dollar enterprises
d. free enterprise and capitalism
ANS: D PTS: 1
28. Michael Gerber, the author of The E-Myth, contends:

a. the entire field of study in entrepreneurship is a myth
b. there is no such thing as entrepreneurship
c. today’s business owners are not true entrepreneurs
d. everybody in business is an entrepreneur
ANS: C PTS: 1
29. Michael Gerber, the author of The E-Myth, explains that the failure of most small businesses is due to:
a. owners being more technical rather than entrepreneurial
b. owners being more managerial rather than technical
c. owners being more entrepreneurial rather than managerial
d. owners being more entrepreneurial rather than technical
ANS: A PTS: 1
30. Entrepreneurs always

a. start their business at a young age
b. quit school and devote themselves to being an entrepreneur
c. use credit cards to start their own businesses
d. generate ideas and plan for their implementation
ANS: D PTS: 1
31. When referring to “luck” and an entrepreneur, which of the following statements is an
appropriate adage?
a. always wait for luck to happen
b. luck happens when preparation meets opportunity
c. luck happens to everyone
d. luck is the key to entrepreneurship
ANS: B PTS: 1
32. The statement, “with every new venture launched, new and unintended opportunities often
arise,” would be associated with:
a. the entrepreneurial principle
b. the opportunity principle
c. the corridor principle
d. the Dilbert principle
ANS: C PTS: 1
33. Entrepreneurs themselves perceive the concept of risk in which of the following ways:
a. calculated risk taking
b. gambling risk
c. distorted risk taking
d. social risk
ANS: A PTS: 1
34. In the study of contemporary entrepreneurship, one concept reoccurs:

a. no one understands the field
b. folklore dominates the studies
c. there is no theoretical base
d. entrepreneurship is interdisciplinary
ANS: D PTS: 1
35. The macro view of entrepreneurship presents factors exhibiting a strong

a. internal locus of control
b. external locus of control
c. environmental locus of control
d. contemporary locus of control
ANS: B PTS: 1
36. Entrepreneurs are accurately described in which way?

a. as gamblers
b. as risk takers
c. as calculated risk takers
d. as risk averse
ANS: C PTS: 1
37. 3M’s Post-it notes are an example of the

a. theory of declining return
b. corridor principle
c. theory of increasing return
d. risk versus reward principle
ANS: B PTS: 1
38. Which of the following schools of thought is not a micro view school of thought?
a. the entrepreneurial trait school of thought
b. the venture opportunity school of thought
c. the displacement school of thought
d. the inherited business school of thought
ANS: D PTS: 1
39. The macro view can be broken down into which three areas?
a. environmental, financial, and displacement
b. financial/capital, strategic, and opportunity
c. displacement, trait, and financial
d. entrepreneurial trait, opportunity, and strategic
ANS: B PTS: 1
40. The displacement school of thought can be divided into which three groups?
a. political, cultural, environmental
b. cultural, environmental, and financial
c. environmental, financial, and economic
d. economic, cultural, and political
ANS: D PTS: 1
41. The micro view is divided into which three theories?

a. entrepreneurial, financial, displacement
b. venture opportunity theory, entrepreneurial, strategic
c. strategic, environmental, and opportunity
d. environmental, financial, and displacement
ANS: B PTS: 1
42. Which of the following is not a form of displacement in the displacement school of thought?
a. political
b. racial
c. economical
d. cultural
ANS: B PTS: 1
43. Which of the following does not apply to the strategic formulation school of thought?
a. unique people
b. unique places
c. unique markets
d. unique products
ANS: B PTS: 1
44. Water well strategies refer to:

a. unique resources
b. unique products
c. unique markets
d. unique products
ANS: A PTS: 1
45. Mountain gap strategies refer to:

a. unique resources
b. unique locations
c. unique resources
d. unique markets
ANS: D PTS: 1
46. The process approach to entrepreneurship seeks to

a. explain the process of obtaining patents
b. model the various factors that characterize the entrepreneurial process
c. explain intrapreneurship
d. explain the process of obtaining venture capital
ANS: B PTS: 1
47. The dynamic states model depicts ventures as

a. being dependent on their environment for survival
b. being independent of their environment
c. being dependent on their managerial talent
d. being independent of their managerial talent
ANS: A PTS: 1
ESSAY
1. Describe entrepreneurs and entrepreneurship in today’s
marketplace. ANS:
Entrepreneurs are individuals who recognize opportunities where others see chaos, or confusion. They
are aggressive catalysts for change within the marketplace. They have been compared to Olympic
athletes challenging themselves to break new barriers, to long distance runners dealing with the agony
of the miles, to symphony orchestra conductors who balance the different skills and sounds into a
cohesive whole, or to top-gun pilots who continually push the envelope of speed and daring. Whatever
the passion, because they all fit in some way, entrepreneurs are the heroes of today’s marketplace.
They start and create jobs at a breathtaking pace.
Entrepreneurship is an integrated concept that permeates an individual’s business in an innovative

manner. It is this perspective that has revolutionized the way business is conducted at every level and
in every country. The revolution has begun in an economic sense, and the entrepreneurial perspective
is the dominant force.
PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics
2. How dominant have new and small ventures been in the economy?
ANS:
The past 20 years have witnessed the powerful emergence of entrepreneurial activity in the United
States. Many statistics illustrate this fact. For example, the U.S. Small Business Administration
reported that, during the past 10 years, new business start-ups numbered nearly 600,000 per year.
Although many of these incorporations may have previously been sole proprietorships or partnerships,
the trend still demonstrates the popularity of venture activity, whether through start-ups, expansions,
or development. More specifically, in the second decade of the new millennium, we have witnessed
the number of businesses in the United States soar to more than 27 million, and that is still growing at
a rate of 2 percent annually.
3. Define a “gazelle” and discuss some of the impact that gazelles have on the economy.
ANS:
New and smaller firms create the most jobs in the U.S. economy. The facts speak for themselves. The
vast majority of these job-creating companies are fast-growing businesses. David Birch of Cognetics,
Inc. has named these firms “gazelles.” A gazelle, by Birch’s definition, is a business establishment
with at least 20 percent sales growth every year for five years starting with a base of at least $100,000.
The ‘gazelle factor’ may be the most important finding in economic growth. Consider that, despite the
continual downsizing in major corporations over the last decade, gazelles produced 5 million jobs and
brought net employment growth to 4.2 million jobs. More recently, gazelles (which currently number
about 358,000, or 4 percent of ongoing companies) generated practically as many jobs (10.7 million)
as the entire U.S economy (11.1 million) during the same period.
SHORT ANSWER
1. Name and describe four of the ten major myths of
management. ANS:
One of the myths of management says that entrepreneurs are born, not made. This myth implies that
entrepreneurs cannot be taught how to be successful. It says that they must be born with certain traits,
such as aggressiveness, initiative, drive, and skill in human relations. However, recent recognition of
entrepreneurship as a discipline is helping to dispel this myth. Another myth is the “all you need is
money” myth, which says businesses fail because of inadequate financing. Actually, poor financing
usually indicates other problems such as managerial incompetence, poor investments, and poor
planning. A third myth says that entrepreneurs are either inventors or innovators. While many
inventors and innovators are entrepreneurs, many entrepreneurs excel at other profit-seeking
activities. A final myth is that all you need is luck. “Luck happens when preparation meets
opportunity” means that being prepared for situations can lead to success when the time is right.
2. List and categorize the schools of entrepreneurial thought.
ANS:
The schools of entrepreneurial thought can be grouped into two major headings, macro and micro.
The macro view of entrepreneurship presents a broad array of factors. These include external factors,
which sometimes cannot be controlled. In the macro view, the environmental school of thought deals
with external factors that affect the possible lifestyle of the entrepreneur. Also under macro, the
financial/capital school looks for seed and growth capital to develop the entrepreneur. The
displacement school is the final macro view. It holds that the group affects or eliminates certain
factors that project the individual into an entrepreneurial venture. The micro view examines factors
specific to entrepreneurship and part of the “internal” locus of control. The entrepreneurial trait school
says that successful entrepreneurs usually exhibit similar characteristics. The venture opportunity
school focuses on opportunities in directions other than where the entrepreneur is presently headed.
The final school, the strategic formulation school, emphasizes the planning process in successful
venture development.
3. Trace the evolution of entrepreneurship, list the persons who wrote about it, and describe its impact
on economic development.
ANS:
Entrepreneurship was first recognized by Richard Cantillon in eighteenth-century France. He
described an entrepreneur as someone who bears the risks of business. During the same time period,
the Industrial Revolution was taking form in England, and the entrepreneur was seen taking risks and
transforming resources into products. Entrepreneurship has long been associated with economic
development. Many definitions of entrepreneurship prior to 1950 came from economists such as
Cantillon, Jean Baptiste Say (1803), and Joseph Schumpeter (1934). In the twentieth century,
entrepreneurship has been associated with free enterprise and capitalism. Entrepreneurs generally are
seen as people who provide creative and innovative ideas for businesses and help them grow and
become profitable. Now, entrepreneurship is regarded as “pioneer ship” on the frontier of business.
4. Provide a comprehensive definition of
entrepreneurship. ANS:
Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is created by
individuals who assume the major risks in terms of equity, time, and/or career commitment of
providing value for some product or service. The product or service itself may or may not be new or
unique but value must somehow be infused by the entrepreneur by securing and allocating the
necessary skills and resources.
OR
Entrepreneurship is ability to create and build a vision from practically nothing: fundamentally it is a
human, creative act. It is the application of energy to initiating and building an enterprise or
organization, rather than just watching or analyzing. This vision requires a willingness to take
calculated risks—both personal and financial—and then to do everything possible to reduce the
chances of failure. Entrepreneurship also includes the ability to build an entrepreneurial or venture
team to complement your own skills and talents. It is the knack for sensing an opportunity where
others see chaos, contradiction, and confusion. It is possessing the know-how to find, marshal, and
control resources (often owned by others).
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CHAPTER 2: THE ENTREPRENEURIAL MINDSET IN INDIVIDUALS
TRUE/FALSE
1. Each and every person has the potential and free choice to pursue a career as an entrepreneur.
ANS: T PTS: 1
NAT: AACSB Reflective Thinking | Motivation Concepts KEY: pg 29
12. The generation of the 21st century may become known as generation E because they are becoming
the most entrepreneurial generation since the Industrial Revolution.
ANS: T PTS: 1
16. Determining a person’s “entrepreneurial perspective” is an exact science.
ANS: F PTS: 1
4. Entrepreneurs are pessimists who see the cup half empty, rather than half full.
ANS: F PTS: 1
5. The Academy of Management Review is an example of a journal used in entrepreneurial research.
ANS: T PTS: 1
6. Government publications are used in researching small business.
ANS: T PTS: 1
7. Inexperience and incompetent management are the main reasons for failure.
ANS: T PTS: 1
NAT: AACSB Reflective Thinking | Motivation Concepts
KEY: pg 29
8. Good entrepreneurs seek feedback from others.
ANS: T PTS: 1
9. A good trait for an entrepreneur is to be a calculated risk taker.
ANS: T PTS: 1
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be
resold, copied, or distributed without the prior consent of the publisher.
Full file at
10. Most successful entrepreneurs have failed at one time or another.
ANS: T PTS: 1
11. Entrepreneurs do not need foresight.
ANS: F PTS: 1
17. Entrepreneurs typically have enough confidence to believe that they can make a difference in the
final outcome of their ventures.
ANS: T PTS: 1
35. Publications, direct observation, speeches and presentations are all major sources of information
that supply data related to the entrepreneurial perspective.
ANS: T PTS: 1
NAT: AACSB Reflective Thinking | Motivation Concepts KEY: pg 29-30
14. There are less than five types of printed research resources available on entrepreneur characteristics.
ANS: F PTS: 1
37. Commitment, determination, and perseverance are the only characteristics one needs to become
a successful entrepreneur.
ANS: F PTS: 1
16. Creativity was once regarded as an exclusively inherited trait.
ANS: T PTS: 1
17. Selfishness and a need for power are two characteristics common in entrepreneurs.
ANS: F PTS: 1
18. Successful entrepreneurs fear failure the same way all people do.
ANS: F PTS: 1
19. Entrepreneurs are fiercely independent but understand the need for a strong entrepreneurial team.
ANS: T PTS: 1
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition.
This may not be resold, copied, or distributed without the prior consent of the publisher.
Full file at
20. Entrepreneurs usually have an internal locus of control.
ANS: T PTS: 1
21. There are many risks in entrepreneurship.
ANS: T PTS: 1
22. There is a certain psychic risk involved with entrepreneurship.
ANS: T PTS: 1
23. There are four causes of entrepreneurial stress.
ANS: T PTS: 1
24. Immersion in business can be cured by limiting work to an eight hour day.
ANS: F PTS: 1
25. The need to achieve can be a source of stress for entrepreneurs.
ANS: T PTS: 1
26. Stress on the entrepreneur can be caused both internally and by other people.
ANS: T PTS: 1
27. The entrepreneur is driven by a strong desire for control over their venture.
ANS: T PTS: 1
39. The “dark side” of entrepreneurship refers to the stress that entrepreneur’s experience.
ANS: F PTS: 1
29. Entrepreneurs always know that they as individuals must remain less important than the venture.
ANS: F PTS: 1
Full file at
40. Entrepreneurs like to remain alert to competition, customers, and government regulations, but
this continual scanning of the environment can lead to a negative sense of distrust.
ANS: T PTS: 1
31. Entrepreneurs are often unrealistically optimistic.
ANS: T PTS: 1
43. Lanny Harron and Harry Sapienza stated, “Because motivation plays an important part in the creation of
new organizations, theories of organization creation that fail to address this notion are incomplete.”
ANS: T PTS: 1
2. According to the Model of Entrepreneurship Motivation, the entrepreneur’s expectations are

not compared with the actual or perceived outcomes of the firm.
ANS: F PTS: 1
MULTIPLE CHOICE
1. Every person has the and to pursue a career as an entrepreneur

a. stubbornness; stupidity c. rights; regulations
b. potential; free choice d. obligation; duty
ANS: B PTS: 1
2. Sources of information available to entrepreneurs include

a. journals. c. casual conversation.
b. moonlighting in another job. d. attending civic events.
ANS: A PTS: 1
3. Entrepreneurs
a. are driven by intense commitment and perseverance.
b. are egomaniacs.
c. loners who never fit in to typical firms.
d. are never satisfied.
ANS: A PTS: 1
4. Which source of information about entrepreneurial characteristics is direct observation?

a. Biographies and entrepreneurs c. Books about entrepreneurs b. Empirical
research d. Television biographies
Full file at
ANS: B PTS: 1
5. Which is not a source of entrepreneurship research?

a. textbooks c. conferences
b. biographies d. water cooler conversation
ANS: D PTS: 1
6. Biographies, journals, and periodicals are examples of what research source?

a. direct observations c. presentations
b. publications d. primary research
ANS: B PTS: 1
4. Characteristics often attributed to the Entrepreneur include:

a. Commitment, determination, and perseverance
b. Prefers to be a loner
c. Power hungry
d. Ability to be indecisive
ANS: A PTS: 1
8. Which is not a trait of a successful entrepreneur?

a. desire to achieve c. innovation
b. initiative d. trouble fitting in
ANS: D PTS: 1
9. Entrepreneurs with a drive to achieve want to

a. compete. c. take great risks.
b. watch others succeed. d. control and dominate.
ANS: A PTS: 1
10. Which of the following is not a trait of successful entrepreneurs?

a. initiative c. perseverance
b. frustration d. strategic thinking
ANS: B PTS: 1
5. With persistent problem solving, entrepreneurs

a. must daydream all day. 6. think anything is possible.
b. can’t multi-task. 7. are always working.
ANS: C PTS: 1
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12. One could correlate with a high energy level.

a. creativity c. luck
b. working d. reading
ANS: A PTS: 1
13. For entrepreneurs, vision describes

a. where the entrepreneur wants to go. c. people.
b. eyesight. d. the future.
ANS: A PTS: 1
7. Team building
a. involves including qualified people in the venture.
b. does not threaten the entrepreneur’s autonomy.
c. does nothing.
d. is overrated.
ANS: A PTS: 1
8. A clear pattern among successful entrepreneurs is

a. setting goals that are just out of reach.
b. the fear of failure common to all people.
c. their focus on opportunity rather than resources.
d. not fitting in to traditional organizations.
ANS: C PTS: 1
9. Which of the following is a false statement about entrepreneurs?

a. They burn with the competitive desire to excel.
b. They see the cup half full rather than half empty.
c. They do not use failure as a tool for learning.
d. They are achievers.
ANS: C PTS: 1
17. Which of the following publications deal with research methodology and are tightly structured?
a. technical and professional journals c. news periodicals b.
textbooks on entrepreneurs d. trade journals
ANS: A PTS: 1
10. Which is not a source of information in an entrepreneurial profile?

a. publications
b. direct observation of practicing entrepreneurs
c. word of mouth
d. speeches and presentations
Full file at
ANS: C PTS: 1
19. One factor not found in high achievers is

a. responsibility. c. moderate risk taking.
b. failure to listen to feedback. d. high risk taking.
ANS: B PTS: 1
20. Which of the following is not a common characteristic of entrepreneurs?

a. vision c. lack of motivational drive
b. team building d. independence
ANS: C PTS: 1
11. Which of the following statements is false?

a. Entrepreneurs are born with the skills necessary to manage a business.
b. Their belief in their ability seldom wavers.
c. Independence is a driving force behind contemporary entrepreneurs.
d. Entrepreneurs know where they want to go.
ANS: A PTS: 1
NAT: AACSB Reflective Thinking | Motivation Concepts KEY: pg 32; 36
12. Which of the following is a true statement about team building?

a. Most successful entrepreneurs have highly qualified teams that handle everything
having to do with the development of the venture.
b. Compared to the owner, personnel are often more qualified to handle day-to-
day implementation challenges.
c. The entrepreneur has the clearest vision in the firm.
d. The entrepreneur needs a competent team to implement an idea.
ANS: D PTS: 1
13. Which of the following statements is false?

a. Entrepreneurs want the authority to make important decisions.
b. Management skills are not important characteristics for entrepreneurs to possess.
c. Successful entrepreneurs strive to build a successful team around them.
d. An entrepreneur can develop the vision of the company over time.
ANS: B PTS: 1
14. When entrepreneurs believe that their accomplishments and setbacks are within their own control
and influence, they are exhibiting
a. persistent problem-solving. c. external locus of control.
b. internal locus of control. d. opportunity orientation.
ANS: B PTS: 1
Full file at
25. If an entrepreneur believes in himself/herself and that their accomplishments and setbacks are within
their own control, they possess a (n) .
15. confidence level higher than most entrepreneurs
16. internal locus of control
17. cockiness level too high to be an entrepreneur
18. high energy level
ANS: B PTS: 1
16. Which of the following is not associated with an entrepreneur seeking feedback?
a. entrepreneurs want to belittle their competition
b. entrepreneurs seek to learn from their competitors
c. entrepreneurs want to improve
d. entrepreneurs have a strong desire to know how well they are doing
ANS: A PTS: 1
17. One trait not common in entrepreneurs is:

a. entrepreneurs are problem solvers
b. entrepreneurs are creative and innovative
c. entrepreneurs need structure
d. entrepreneurs are independent, yet like to build strong teams
ANS: C PTS: 1
18. What characteristic(s) that propel entrepreneurs into success can be exhibited to the “extreme”?
a. Overbearing need for control
b. Optimism
c. High energy
d. Desire for success
e. Perseverance
ANS: A PTS: 1
29. Areas of risk to the entrepreneur include

a. career, family, psychic. c. psychic, social, physical.
b. family, business, social. d. financial, product, market
ANS: A PTS: 1
30. With psychic risk you fear

a. losing your sanity c. money
b. failure. d. adapting.
ANS: B PTS: 1
31. Which of the statements below is not a risk faced by entrepreneurs?
Full file at
a. financial risk c. business risk
b. career risk d. product risk
ANS: C PTS: 1
19. Small business owners face many day-to-day risks. Which statement is most related to risk?
a. Not getting a bank loan.
b. Entrepreneurs run the risk of having an incomplete family experience.
c. Not securing a particular contract.
d. Risk is never a good thing.
ANS: B PTS: 1
33. In starting or buying a new business, the higher the rewards, the
a. risk is then minimized. c. greater the size of a business.
b. greater the risk. d. smaller the enjoyment.
ANS: B PTS: 1
34. Which of the following may be the greatest risk to the well-being of the entrepreneur?
a. social risk c. psychic risk b. financial risk d. family risk
ANS: C PTS: 1
35. In the Monroy-Folger Model of Risk Typology, profit-seeking activity is associated with:
a. strong desire to maximize profit c. strong desire to minimize profit
b. weaker desire to maximize profit d. strong desire to maximize sales revenue
ANS: A PTS: 1
NAT: AACSB Reflective Thinking | Motivation Concepts TOP: pg 38
20. Generally, entrepreneurial stress is due to

a. being surrounded by incompetents.
b. fear of failure.
c. the discrepancy between the entrepreneur’s expectations and the ability to meet demands.
d. caused by a big ego.
ANS: C PTS: 1
37. Stress can be dealt with by:

a. networking. c. both a and b.
b. delegating. d. working harder.
ANS: C PTS: 1
38. Which of the following is not a source of stress?

a. success in business c. people problems
Full file at
b. immersion in business d. family requirements
ANS: A PTS: 1
39. Which of the following is not a way to combat stress?

a. acknowledging its existence c. probing personal unacknowledged needs
b. ignoring coping mechanisms d. taking a few days off
ANS: B PTS: 1
21. The four major causes of entrepreneurial stress are

a. loneliness, immersion in business, people, need to achieve.
b. people, size of business, need to achieve, fear.
c. fear, failure, pressure, competition.
d. drive for success, loneliness, fear, competition.
ANS: A PTS: 1
41. The best antidote for relieving the stress involved with total immersion in business is
a. networking. c. finding satisfaction outside the company.
b. getting away from it all. d. delegating.
ANS: B PTS: 1
42. Entrepreneurial stress can be caused by having a type A personality which can be defined as
a. having a chronic sense of time urgency c. getting away from business
b. taking too little responsibility d. taking things personally
ANS: A PTS: 1
43. According to the text, what is the most ironic type of stress?
a. loneliness c. people problems
b. immersion in business d. need to achieve
ANS: B PTS: 1
22. The entrepreneurial ego can cause the entrepreneur to

a. have a sense of pessimism.
b. take characteristics that usually lead to success to the extreme.
c. ignore government regulations.
d. take too few risks.
ANS: B PTS: 1
45. Entrepreneurs with a sense of distrust

a. scan the environment. b. examine c. ignore everything.
the business. d. become fearful.
Full file at
ANS: A PTS: 1
23. Which of the following is an aspect of the “dark side” of entrepreneurship?

a. a need for control c. both a and b
b. a sense of distrust d. bouts of euphoria
ANS: C PTS: 1
24. Which of the following is not one of the four major traits that characterize the “dark side”
of entrepreneurs?
a. an external optimism c. knowing when to take a vacation
b. a desire for success d. a sense of distrust
ANS: C PTS: 1
25. The “dark side” of entrepreneurship refers to

a a destructive force within the energetic drive of entrepreneurs.
b the part of entrepreneurship that is most exciting.
c a misunderstanding about the results of entrepreneurship.
d another myth of entrepreneurship.
ANS: A PTS: 1
e. ________________ was credited with stating, “Individuals are, after all, the energizers of the
entrepreneurial process.”
a. Lanny Herron c. Bradley Johnson
b. Max DePree d. Steven Covey
ANS: C PTS: 1
26. The decision to behave entrepreneurially is the result of the interaction of:
a. the individual’s personal entrepreneurial mindset and an opportunity
b. the existence of a viable business idea
c. the relevant business environment
d. a new market
ANS: A PTS: 1
51. When outcomes meet or exceed expectations, _____________________ is positively reinforced.

a. entrepreneurial behavior c. desire for success b. entrepreneurial
motivation d. entrepreneurial ego
ANS: A PTS: 1
27. Which is not a factor in the Model of Entrepreneurial Motivation? a.

the entrepreneur’s outcomes meet their expectations
Full file at
28. personal goals are met
29. implementation of the entrepreneurial plan meet the entrepreneurs outcome perceptions
30. wining awards
ANS: D PTS: 1
29. According to the Model of Entrepreneurial Motivation, when outcomes meet or exceed expectations, the
_____ is positively reinforced, and the individual is motivated to continue to behave
entrepreneurially.
a. stressful behavior c. the dark side
b. entrepreneurial behavior d. unrealistic optimism
ANS: B PTS: 1
SHORT ANSWER
30. Name the three sources of research on entrepreneurs and explain five entrepreneurial
characteristics that you feel are important.
ANS:
The three sources of research are publications, direct observations, and speeches or
presentations. Publications include both research-based and popular sources. Direct observation
is done through interviews, surveys, and case studies. Speeches and presentations are given by
practicing entrepreneurs. Characteristics that are important to one individual may not be the
same characteristics that are important to another. One characteristic is the drive to achieve.
PTS: 1 NAT: AACSB Reflective Thinking | Motivation Concepts
31. Explain and discuss the “dark side” of entrepreneurship.
ANS:
The entrepreneurial profile has its destructive side. First, the need for control can become an
obsession. The need for control can cause problems in networking and in an entrepreneurial
team. A sense of distrust can cause the entrepreneur to lose sight of reality or focus on trivial
things. An entrepreneur’s desire for success can also be destructive if the individual becomes
more important than the venture itself. The last “dark side” trait is external optimism. When the
entrepreneur takes optimism to the extreme, he or she may begin using a fantasy approach to the
business. Trends, facts, and reports are ignored because the entrepreneur thinks everything will
turn out fine.
e. Discuss the specific areas of entrepreneurial
risk. ANS:
Full file at
The four areas of risk are financial risk, career risk, family and social risk, and psychic risk. First, financial
risk deals with the amount of savings or resources that the entrepreneur puts into venture. If the venture is not
successful, the money or resources will most likely be lost. The entrepreneur will probably sign obligations that
exceed his or her personal wealth. The second risk is career. The would-be entrepreneur frequently asks if he or
she will be able to find a job or go back to a previous job. The new venture has no guarantees about career
security. Family and social risk are also to be considered.
4. Name the sources of entrepreneurial stress and discuss the ways of dealing with stress.
ANS:
Entrepreneurs experience four types of stress. The first is loneliness. Although there are many people around
the entrepreneur, there are few in whom he can confide. Another stress is immersion in business. A successful
entrepreneur may make enough money for vacations, but never have the time to go because the business would
not allow it. People problems are another type of stress. The entrepreneur may get frustrated, disappointed, and
aggravated by employees or other individuals upon whom the venture’s work depends. Usually this happens
when the entrepreneur’s expectations of a high performance are not met. The last source of stress is the need to
achieve. The entrepreneur usually attempts to accomplish too much and sometimes cannot manage to control the
need for achievement. The three steps an entrepreneur can take to reduce stress are acknowledging its existence,
developing coping mechanisms, and probing for personal unacknowledged needs. There are five ways in which
an entrepreneur can cope with stress. First is networking. Networking involves sharing experiences with other
business owners. Another coping mechanism is to get away from it all. These interludes help combat immersion
in business. Communicating with subordinates may help to cope with stress. The entrepreneur can be aware of
the concerns employees have about their jobs.
Finding satisfaction outside of the company is also important. The entrepreneur needs to get away and
enjoy life. The last way an entrepreneur can deal with stress is by delegating. Appropriate delegates need to be
found and trained so the entrepreneur can gain time away from the business.
CHAPTER 3: THE ENTREPRENEURIAL MIND-SET IN ORGANIZATIONS -

CORPORATE ENTREPRENEURSHIP
TRUE/FALSE
1. Corporate Entrepreneurship activity occurs outside the firm.

ANS: F PTS: 1 KEY: page 56
2. Polaroid and 3M have had successful corporate entrepreneurship ventures.

ANS: T PTS: 1 KEY: page 53
13. One reason that corporate entrepreneurship has become popular is because it allows corporations to tap the innovative talents
of the personnel.
4. As part of creating an innovative climate, a firm should base rewards given upon results achieved.
5. A corporation can encourage entrepreneurship activities if top management sponsors entrepreneurial projects.
6. Few firms today realize the need for corporate entrepreneurship.

7. The need for entrepreneurship has risen in response to the rise of the global economy.
8. Clever bootlegging of ideas refers to secretly working on new ideas on company time as well as on personal time.
9.Individuals may avoid corporate entrepreneurial behavior due to the impact of traditional management techniques.
10. Skunkworks are project groups that work within the traditional lines of authority.
11. Very large corporations such as 3M have really struggled with corporate entrepreneurship ventures.
ANS: F PTS: 1 KEY: pages 53, 63-64
17. Today’s managers must foster excitement for innovation and remove obstacles for employees to engage in
corporate entrepreneurship.
18. Firms do not need to alter management techniques to encourage corporate entrepreneurship since it tends to occur
naturally.
14. Trust from the company is one key element to successful corporate entrepreneurship.
ANS: T PTS: 1 KEY: pages 54 and 62
15. Employees shouldn’t expect feedback on their entrepreneurial ideas.

ANS: F PTS: 1 KEY: pages 54 and 73
16. Corporations that promote personal growth will attract the best people.
17. When an entrepreneurial environment is created, a company does not usually set aside traditions of the company.
1
18. Every business person feels comfortable operating in an entrepreneurial environment.
19. The first step in planning a strategy of corporate entrepreneurship is sharing the vision of innovation that executives wish to
achieve.
20. Systematic evolution of a product or service into newer or larger markets is referred to as radical innovation.
21. Corporate entrepreneurs should be restricted to the resources of their own divisions of the corporation.
22. Researchers have identified specific factors that organizations can concentrate on in helping individuals develop
more entrepreneurial behavior.
23. Corporate venturing flourishes when a vertical management system is in place.

36. A healthy environment for corporate entrepreneurship exists when employees can feel a sense of ownership in the
company.
25. Radical innovations must be nurtured.

26. A “champion” is a person with a big ego and just gets in the way of corporate entrepreneurship.
27. A competitor’s move to increase market share can be a precipitative event in corporate entrepreneurship.
28. Corporate entrepreneurs are people who are action oriented and self-determined.
29. The resources of the organization are irrelevant to the ability of the corporate entrepreneur to implement an idea.
30. Understanding the entrepreneur is only part of understanding the entrepreneurial process.
ANS: T PTS: 1 KEY: pages 54, 59
31. Corporate entrepreneurs generally are power oriented or power hungry.

32. The Interactive Process is a result of individuals and organizational characteristics interacting with some precipitating
event.
33. The success of corporate entrepreneurship depends on the entrepreneurs within the firm.
34. Organizational boundaries allow people to focus on new ideas.

MULTIPLE CHOICE
1. Corporate entrepreneurial activity takes place the firm.

a. only with outside suppliers to c. both inside and outside
b. with anyone outside d. Inside
ANS: D PTS: 1 KEY: page 56
2
38. Which of the following was one of the factors Drucker mentions to explain the development of the
entrepreneurial economy?
← the rapid evolution of technology and knowledge
← demographic trends
← government regulation
← a robust venture capital market
ANS: A PTS: 1 KEY: page 53
3. One reason why corporate entrepreneurship has done so well is that it allows organizations to
a. increase salaries. c. encourage high risk taking.
b. fire the dead wood. d. tap the innovative talents of their people.
4. Intrapreneurship is also referred to as:

a. inside entrepreneurship c. corporate entrepreneurship
b. internal entrepreneurship d. outside entrepreneurship
ANS: C PTS: 1 KEY: page 53
5. ____people thoroughly understand the concept of corporate entrepreneurship.

a. Just about all c. Many
b. Most d. Few
6. The major thrust of corporate entrepreneurship is to

a. encourage greater risk taking. c. encourage innovation.
b. raise profitability. d. increase morale.
40. All of the following are reasons for the growth of corporate entrepreneurship except
← a desire to dramatically increase profitability.
← a rapidly growing number of new and sophisticated competitors.
← a sense of distrust in the traditional methods of corporate management.
← an exodus of some of the best people out of corporations.
41. Which of the following helps account for the rise of interest in corporate entrepreneurship?
← There is a decrease in the number of sophisticated competitors.
← Government regulation of small entrepreneurs.
← Corporations are now losing some of their best people.
← A general increase in the number of competitors.
44. Which of the following is an obstacle to corporate entrepreneurship?

← orientation to the market
← a system of feedback and positive reinforcement
← traditional management techniques
← rewards based upon results
10. In following the rules for innovation, a manager should do all of the following except
a. encourage action. c. punish failure.
b. use formal meetings whenever possible. d. reward performance.
3
3. In restructuring corporate thinking, top management should
a. identify potential entrepreneurs after an innovation program is in operation.
b. make the entrepreneur follow strict corporate guidelines.
c. promote entrepreneurship through experimentation.
d. create diversity and order in strategic activities.
4. Which of the following is not a question in the corporate entrepreneurial planning process?
a. does the firm encourage and reward entrepreneurs?
b. do employees frequently require permission?
c. Does the firm direct resources toward entrepreneurship?
d. Have you met government regulations for innovation?
13. Secretly working on new ideas on company time as well as on personal time is referred to as
a. skunkworks. c. bootlegging.
b. champion. d. interactive learning.
14. The adverse impact of can be so destructive that individuals within the enterprise will tend to avoid
entrepreneurial behavior.
a. traditional management techniques c. specific entrepreneurial strategies
b. innovative climate rules d. informal meetings
15. Innovative factors identified by James Brian Quinn that exist in large organizations experienced in successful
innovation include all of the following except:
a. interactive learning. c. multiple approaches.
b. uniform compensation. d. skunkworks.
ANS: B PTS: 1 KEY: page 58
16. Groups that function outside traditional lines of authority permitting rapid turnaround of new ideas as well as instilling
a high level of group loyalty are called:
a. skunkworks. c. champions.
b. multiple approaches. d. strategic innovators.
5. Which of the following would not be considered as encouraging to an entrepreneurial environment?

a. uniform compensation
b. identifying potential entrepreneurs
c. top management sponsorship of entrepreneurship
d. promotion of entrepreneurship through experimentation
6. In an innovative climate, failure is viewed as

a. the end of the world.
b. a learning experience.
c. O.K., inevitable, since the employee is probably not capable of further innovative thought.
d. a basis for firing.
8. One step an organization can take to make its corporate environment more innovative is to
a. gain top management support of an entrepreneuring program.
b. fire top management and hire young executives.
c. change the dress code to “casual attire.”
d. give across-the-board raises.
4
8. Which of the following will help to foster an innovative climate?

a. encourage action from employees
b. punish mistakes
c. eliminate coffee breaks to encourage employees to work harder
d. do away with dress codes
9. Bureaucrats in an organization must

a. standardize procedures 10. learn to give way to intrapreneurs
b. engage in horizontal management 11. avoid risky moves
22. Authoritarian management is being replaced by

a. networking. c. Japanese managers.
b. independent contractors. d. benevolent managers.
23. Corporate entrepreneurial strategy should be thought of as

a. vision directed c. restricted to one group in the firm
b. Dichotomous d. management directed
11. In attempting to create an entrepreneurial climate, the organization should consider that
a. the corporations that promote personal growth will attract the best people.
b. strict management rules work best.
c. third-party contractors of labor will not be used.
d. workers like independence.
25. All of the following are important characteristics for establishing an intrapreneurial climate except
a. the presence of explicit goals. c. positive reinforcement.
b. feedback. d. punishment of mistakes.
26. Rewards should be based upon _____ to encourage the desired behavior.
a. Seniority c. attitude
b. Results d. morale
27. Key features in the success of any innovative program include all of the following except
a. confidence. c. accountability.
b. trust. d. high profitability.
12. Entrepreneurship within the corporate structure allows employees to develop their ideas without
a. losing their jobs to more loyal subordinates.
b. the risk associated with leaving the company.
c. making their spouses angry that they quit their jobs.
d. fear of being promoted.
13. The first step in planning a strategy of entrepreneurship for enterprise is
a. identifying specific objectives.
b. sharing the vision of innovation.
c. applying the exact tools of the entrepreneur.
d. developing radical innovation.
5
14. The second step in planning a strategy of entrepreneurship for the enterprise is
a. identifying specific objectives.
b. sharing the vision of innovation.
c. applying the exact tools of the entrepreneur.
d. developing and encouraging innovation.
31. Which of the following terms represents the systematic evolution of a product or service into newer or larger markets?
a. radical innovation c. collective entrepreneurship
b. incremental innovation d. strategic management
32. Which of the following terms represents the inaugural breakthroughs launched from experimentation and determined
vision?
a. radical innovation c. collective entrepreneurship
b. incremental innovation d. strategic management
15. Which of the following are specific factors identified by researchers, that organizations can concentrate on
in structuring an entrepreneurial climate.
a. radical innovation, incremental innovation, and vision
b. skunkworks, multiple approaches, and vision
c. top management support, time, resources, rewards, and organizational boundaries
d. rewards, resources, innovation, and vision
34. Internal venture capital that is set aside for special entrepreneurial projects is termed:
a. intracapital. c. intrapreneurial seed money.
b. project capital. d. collective capital.
35. Which of the following are innovative rules that the 3M Corporation uses to encourage its employees to foster ideas?
a. tolerate failure c. kill projects selectively
b. keep the focus on your main business d. reward performance relative to profits
36. Employee perception of is critical for the success of corporate entrepreneurship.

a. equality. c. interactive learning.
b. a good benefits program. d. an innovative environment
19. Which of the following is an advantage to developing an entrepreneurial environment?

a. a good benefits program.
b. the firm helps to retain and motivate the best employees
c. creation of a work force that adheres to strict rule
d. a flexible work environment regarding time off work
38. Which of the following is not a strategy for corporate entrepreneuring?

a. promote personal growth c. decrease the use of third-party contracts
b. use people-style management d. allow entrepreneur to develop ideas
39. In order to develop an entrepreneurial environment, factors that organizations need to be aware of include:
a. management support and rewards c. business plans and inventions
6
b. autonomy and time d. a and b should be considered
40. Brazeal’s model for internally developed corporate entrepreneurial ventures emphasizes
a. growth through acquisition c. organizational boundaries
b. institutionalized innovation d. time availability
41. Developing corporate entrepreneurial managers involves teaching them to

a. Conduct business as usual c. Give across-the-board raises.
b. Break out of the box. d. Think of new ad campaigns.
ANS: B PTS: 1 KEY: pgae 55
42. The person who has the opportunity to lead and “run” with an idea would be coined which of the following:
a. Department Manager c. Champion
b. Manager d. Visionary
17. Which is not a precipitating event that Zahra identifies as motivating the decision to act entrepreneurially
a. market instability. c. new demand for a firm’s products.
b. competitive threat from rivals. d. a big increase in earnings.
44. Entrepreneurial characteristics include

a. a strong drive to succeed. c. high risk taking.
b. superior intelligence. d. low morals.
18. Typically, when faced with setbacks or failure, entrepreneurs

a. remain optimistic and view it as a learning experience.
b. become outraged and take a short vacation.
c. blame top management.
d. resign.
46. Success of the corporate entrepreneurship plan depends on

a. resources provided by the firm. c. a few individuals.
b. high morals and ethics. d. the reaction of rivals.
47. Sustaining corporate entrepreneurship requires

a. keeping up with market trends. c. keeping the corporate vision strong.
b. maximizing profits. d. equal pay raises.
48. One research model illustrated the process of entrepreneurship as an interaction of which elements?
a. organization, individual, precipitating c. myths, realities, perceptions event
b. intrapreneur, entrepreneur, manager d. price, marketing, suppliers

49. Precipitating events in the corporate entrepreneurship process could include:

a. laying off workers. c. change in company location.
b. development of new technologies. d. higher productivity standards.
7
SHORT ANSWER
19. Describe the steps necessary to take an individual from a climate that is very hierarchical
in nature to an entrepreneurial setting.
ANS:
As a quote from the text states, “To establish corporate entrepreneuring, companies need to provide
the freedom and encouragement that intrapreneurs require to develop their ideas.” This statement is
very true, but it could be developed further. For example, managers coming from a traditional style of
management believe in keeping ideas bottled up in their heads because they actually believe that it will
serve no purpose to present them to upper management. Often, shop floor personnel are overlooked in
terms of being innovative. Secondly, a more horizontal way of communication and delegation would
be better. This way no one person could stop a project completely and everyone could work as a team
providing input. Lastly, develop and practice the basics as mentioned in the text.
PTS: 1 KEY: page 68
20. Using the Signode’s V-Teams example from the text, explain how some programs may succeed or
fail using this approach.
ANS:
Signode is using an aggressive strategy to pursue new products. Success will be tough for some
products, but the stringent rules placed on the new products will help to keep the basic use of
technology that Signode has and possibly develop new technologies, instead of branching out into
some area that the company has never pursued, i.e., the clothing industry. The failure may come
from the fact that Signode wants to be worth $1 billion-plus by 1990. It may not be enough time for
them to accomplish this task. If the push is big enough, the company may find itself in bad shape
financially and have to rethink the primary purpose of the company.
PTS: 1 KEY: page 71
21. Explain some of the disadvantages that may occur in firms that are trying to incorporate
entrepreneurship into their organizations.
ANS:
One disadvantage may be that there is resistance to change by some managers. Also, if a
company jumps into intrapreneuring too quickly without proper training, there may be some
managers left not knowing what to do. If the corporate climate is not right for intrapreneuring, there
is almost no chance for success.
PTS: 1 KEY: page 56
CHAPTER 5: INNOVATION: THE CREATIVE PERSUIT OF IDEAS
TRUE/FALSE
1. Peter Drucker has stated that successful innovators must look, ask, and listen.
ANS: T PTS: 1 KEY: pg 141
2. Innovation is the process by which entrepreneurs convert opportunities into marketable ideas.
3. The innovation process involves only the development of a good idea.

ANS: F PTS: 1 KEY: pg 140
4. The 4 basic types of innovation are invention, extension, duplication, and synthesis.
5. Entrepreneurs are always looking for unique opportunities to fill needs or wants.
6. Creativity is the generation of ideas that result in the improved efficiency or effectiveness of a system.
7. Creativity cannot be developed or improved.

8. Structured and focused chaos is necessary for creativity to occur.

9. Truly creative people are always geniuses.

10. Successful creations do not require investigation and information gathering.

11. Many inventions and innovations are a result of the inventors seeing new and different relationships
among objects, processes, materials, technologies, and people.
14. The innovation process allows creative people to subconsciously mull over the information they
have gathered.
13. Creative people always exhibit a strong need for group approval.
18. The four phases of the creative process are knowledge accumulation, incubation, idea experience, and
evaluation.
15. The easiest step in the creative endeavor is the implementation and evaluation phase.
16. The left hemisphere of the brain produces logical and analytical skills.
17. The creative climate rejects the ambiguity common in work and life.
1
18. Background or knowledge accumulation is the second phase of the creative process.
19. Incubation in the creative process often occurs when the individual is doing something
completely unrelated to the subject.
20. The idea experience phase of the creative process is often the least interesting part of the process.
21. Only new patterns of thinking will lead to new ideas and innovation.
22. Innovation is planned and predictable.

23. Most innovations result from a conscious, purposeful search for new opportunities.
24. Most successful innovations are complex and focused.

25. Incongruities are gaps or differences between expectations and reality.

26. Innovators must always search for new ideas, opportunities, or sources of innovation.
27. Extension is the combination of existing concepts and factors into a new formulation.
28. Synthesis is the combining of two existing concepts into a new formulation.
29. In innovation through duplication, a product is simply copied.

30. The principles of innovation are largely focused on profit maximization.

31. Innovation should follow a milestone schedule.

32. It is really genius and not hard work that creates success for the entrepreneur.
33. Innovative activity should be rewarded.

2
MULTIPLE CHOICE
1. Which of the following questions concerning innovation is not relevant?

a. “What is the problem?” c. “What costs are involved?”
b. “Whom does it affect?” d. “When the product goes to market?”
ANS: D PTS: KEY: pg 130
1

← Innovation is the specific function of entrepreneurship.
← Innovation is the process by which entrepreneurs consume marketable ideas.
← Innovation does not involve change.
← Innovation is the government’s responsibility.
ANS: A PTS: 1 KEY: pg 140
3. Which of the following are keys to understanding opportunity and its development for entrepreneurs?
a. creativity and capital c. background and knowledge b. innovation and
creativity d. incubation and experience ANS: B PTS: 1 KEY: pg 127
37. Entrepreneur sense potential in business problems by asking

← who is to blame and how to relocate them?
← what about profits?
← what if and why not?
← farfetched, unimaginative questions
ANS: C PTS: 1 KEY: pg 130
5. The two most important aspects of creativity are

a. design and solution. c. process and people.
b. intelligence and technical competence. d. capital and opportunity.

← People are born with creativity and can do nothing to change their level of creativity.
← People can learn to be creative.
← Creativity has nothing to do with learning.
← The creative mind cannot be developed.
41. Some ways to develop a creative mind include

← reading a variety of textbooks on entrepreneurship.
← creative minds are born not made.
← observing other entrepreneurs.
← getting away from it all.
ANS: C PTS: KEY: pg 131 & 132
1
8. The incubation process involves which of the following?

a. working harder c. talking with friends
b. letting the subconscious work d. changing jobs
ANS: B PTS: KEY: pg 132
1

← The right brain helps people analyze and verbalize.
← The right brain helps people understand analogies and imagine things.
← The left brain helps people understand analogies and imagine things.
← Right and left brain concepts are meaningless.
ANS: B PTS: 1 KEY: pg 134
3
10. Which of the following can help speed up the idea process?
a. working harder c. taking breaks while working b. seeing new movies d.
intuition
ANS: C PTS: KEY: pg 132
1
45. Which of the following can help carry out the evaluation and implementation stage?
← increasing energy level
← hide your ideas from knowledgeable people
← avoid advice from others
← ignore hunches and feelings
4. A person can develop their own creativity by

a. quitting a boring job.
b. focusing on making money.
c. taking up a new hobby.
d. seeing new and different relationships in people, objects, and places around them.
ANS: D PTS: KEY: pg 133
1
13. Which of the following is a characteristic of creative people?

a. bright but not necessarily brilliant c. rigid and dogmatic
b. poor image of themselves d. unmotivated by challenging problems
ANS: A PTS: KEY: pg 141
1

a. The right brain is more important in the creative process than the left brain.
b. The left brain is more important in the creative process than the right brain.
c. Both sides of the brain are important to the creative process.
d. Motivation, not the brain is the key to the creative process.
1
15. Which of the following mental habits inhibit creativity and innovation? a.
either/or thinking, stereotyping c. security hunting, risks b. functional
perspective, mindsets d. stereotyping, incubation
6. Security hunting means
a. using probability and stereotypes to minimize risk
b. finding a permanent source of venture capital
c. sticking firmly to decisions
d. installing a security system
7. Which of the following statements is not true?

a. Creative ideas never come out of the blue.
b. Ideas often emerge during activities unrelated to the enterprise.
c. ANSs usually come to an individual incrementally.
d. Creative individuals allow their subconscious to mull over information.
1
18. Which one is not one of the phases in the creative process?
a. background or knowledge accumulation c. the incubation process
PTS: 1
ANS: D
KEY: pg 131 & 132
4
19. In the incubation process, ways of getting away from a problem include
a. working harder c. going to parties.
b. working on something else. d. visiting the library.
9. Successful entrepreneurs are able to identify

a. those ideas that are workable and that they have skills to implement.
b. those ideas that will make money.
c. those ideas that are not feasible.
d. those ideas that will win instant approval from customers.
9. Security hunting is
a. looking for a safe place to sleep.
b. trying to make the right decision or take the correct action.
c. taking no action that involves risk.
d. adding a firewall to your computer system.
10. Creativity is most likely to occur when the “climate” is right. What is a characteristic of that climate?
a. willingness to avoid change
b. employees with similar work habits
c. trustful management that does not exert strict control over employees
d. strict management rules
12. Relying on abstractions can

a. limit one’s perception of reality. 12. help in making correct choices.
b. do nothing detrimental. 13. add a mathematical element to the idea.
13. Logical, analytical skills are developed by the

a. left hemisphere of the brain. 14. central hemisphere of the brain.
b. right hemisphere of the brain. 15. anterior hemisphere of the brain.
25. Which of the following terms would not be associated with the right hemisphere of the brain?
a. Synthesizing c. spatial
b. Linear d. intuitive
26. Which of the following terms would be associated with the left hemisphere of the brain?
a. Nonrational c. abstract
b. Nonverbal d. imagining
15. All of the following are characteristics of a creative climate except

a. a large variety of personality types.
b. an enjoyment in experimenting with new ideas.
c. restricted communication with outsiders.
d. a willingness to accept change.
5
16. The four phases in the creative process in order are
a. background or knowledge accumulation, incubation, idea experience, and evaluation and implementation.
b. idea experience, background or knowledge accumulation, incubation, and evaluation and implementation.
c. incubation, background or knowledge accumulation, idea experience, and evaluation and implementation.
d. evaluation and implementation, idea experience, incubation, and background or knowledge accumulation.
20. Which of the following statements is true with regards to creativity?

a. people’s approach will remain the same, but their process will change.
b. people’s process will remain the same, but their approach will change.
c. people’s approach and process will both remain the same.
d. people’s approach and process will both change.
18. People practice the creative search for background knowledge in which of the following
ways: a. join professional groups and organizations c. a and b
b. attend seminars or professional meetings d. socializing at parties
31. The idea experience phase of creativity is also referred to as

a. the eureka factor c. the wow theory
b. the big bang theory d. the light bulb going on
19. Which of the following is not an example of recognizing relationships in creativity?

a. adding fruit juice to soft drinks to make Slice
b. Introducing Sierra Mist to the market to compete with Sprite
c. combining combustion engine technology with the wheel to create the automobile
d. using a 330 pound defensive football player as a running back and wide receiver

a. Successful innovations are clear and focused.
b. Successful innovations are directed toward unclear applications.
c. Most successful innovations are detailed and ambiguous.
d. Successful innovations are profit motivated.
1
34. The four types of innovation include which of the following?

a. invention, extension, synthesis, duplication c. synthesis, extension, retention, analysis
b. extension, retention, analysis, duplication d. analysis, synthesis, duplication, retention
1

a. A good innovator should be a genius.
b. Innovators rarely work in more than one field.
c. Innovators are poor workers.
d. A good innovator uses only the left side of the brain.
1
36. Which of the following are sources of innovation?
b. duplication and processes d. industry changes and extension

1
6
37. Which of the following are causes of industry and market changes?
a. process needs c. unexpected occurrences b. advancements in technology
d. natural disasters
1
22. Most innovations result from

a. the total genius of inventors.
b. a conscious and purposeful search for new opportunities.
c. lucky guesses.
d. the subconscious adaptation to reality.
22. The combination of existing concepts and factors into a new formulation would define which of
the following terms?
a. Synthesis c. invention
b. Extension d. analysis
40. Ray Kroc’s development of McDonald’s would be a good illustration of which form of innovation?
a. Invention c. duplication b. Extension d. synthesis ANS: B
PTS: 1 KEY: pg 141
23. A potential entrepreneur needs to realize that

a. there are no principles of innovation.
b. principles of innovation can be learned.
c. monetary gain is the principal motivator in all innovation.
d. profitability is the ultimate key to success.
42. Most successful innovations are
a. simple and focused. c. focused and extensive.
b. complex and focused. d. complex and extensive.
43. Which of the following is not a type of innovation?

a. Invention c. adaptation
b. Duplication d. synthesis
44. A gap or difference between expectations and reality defines

a. process needs. c. demographic changes.
b. incongruities. d. changes in perception.
24. Process needs

a. exist when and entrepreneur can meet a new source of demand.
b. exist to satisfy government regulations.
c. exist when a venture capitalist provides money only for a project filling its needs.
d. exist when the economy suffers a downturn.
25. The phase of the creative process when the idea or solution the individual is seeking is discovered is the
a. background or knowledge accumulation. c. idea experience.
b. incubation process. d. evaluation and implementation.

1
7
47. Shifts in consumer tastes and attitudes are an example of
a. a marketing opportunity. c. the fickle consumer.
b. industry and market changes. d. problems for the entrepreneur.
48. Overnight package delivery can be an illustration for which source of innovation?
a. Incongruities c. process needs
b. unexpected occurrences d. change in perception
49. Retirement centers for older people reflect which source of innovation?
a. industry changes c. perception changes
b. demographic changes d. unexpected occurrences
26. Which of the following is considered a myth of innovation?

a Creativity relies on blue sky ideas.
b Small projects develop into successful innovations.
c Innovations are unpredictable.
d Creativity can be learned.
51. Which of the following is not considered a principle of innovation?

a. Be action oriented. c. Invest in securities.
b. Start small. d. Reward heroic activity.
8
SHORT ANSWER
1. List and briefly explain each of the phases in the creative process.
ANS:
The first phase is known as background or knowledge accumulation. This is the process of
reading, conversations with others working in the field, and general absorption of information
relative to the problem or issue under study. The second phase is the incubation process. This
involves the subconscious, which processes information gathered previously. The third phase is
idea experience. This is when the idea being sought is discovered. Sometimes the idea comes
while performing unrelated tasks. The final phase is known as evaluation and implementation.
This phase requires courage, self-discipline, and perseverance. Ideas are often reworked to obtain
a final form. Most importantly, the entrepreneur doesn’t give up.
f. Creative talents can be improved through practice and awareness of habits that can cause
problems. However, there are ways to increase creativity; one area is to recognize relationships.
Explain what is meant by this.
ANS:
Many inventions and innovations are a result of the inventor seeing new and different
relationships between objects, processes, materials, technologies, and people.
27. Creativity is most likely to occur when the “climate” is right. The text listed several
important characteristics of this climate. What is the right climate?
ANS:
It is a climate where communication flows between a variety of people and fear of

management is rare or nonexistent. This environment displays a willingness to change and
rewards innovation.
28. Describe the innovation
process. ANS:
The process begins with a conscious, purposeful search for new opportunities, followed
by an analysis of the sources of new opportunities.
31. The Small Business Innovation Development Act directs that small firms get at least a fixed
minimum percentage of research and development awards made by federal agencies with sizable
R&D budgets. What are the implications of this act?
ANS:
This means that small high-technology firms will receive more federal R&D awards than
before. This will help small businesses remain competitive with larger companies. Under this
Act, the SBIR (Small Business Innovation Research) program was established. Proposals are
solicited from small high technology firms by eleven federal agencies. There are three phases of
an R&D award in the SBIR programs. In Phase I awards are made for research projects intended
to evaluate the scientific and technical merit and feasibility of an idea. These awards generally
are $100,000 or less and the phase lasts about six months. Funding for those projects with the
most potential are continued. In Phase 2 awards of $750,000 or less are made for further
development of the innovation. This phase usually lasts about two years. Phase 3 is characterized
by private-sector investment and support that will bring the innovation to the marketplace.
CHAPTER 6: PATHWAYS TO ENTREPRENEURIAL VENTURES
TRUE/FALSE
15. The way to approach a new business venture is to think up a good or service that is unique.
ANS: T PTS: 1 NAT: AACSB Reflective Thinking | Strategy

KEY: pg 150
19. Uniqueness in a product or service can be demonstrated through a new-new approach or

a new-old approach.

KEY: pg 171
3. The action plan covers 3 primary areas: the owner, the finances, and other vital factors.

KEY: pg 174
4. Sales records are of very little value to a buyer in evaluating a company’s worth.
ANS: F PTS: 1 NAT: AACSB Reflective Thinking | Strategy

KEY: pg 159
5. The acutal cost of “opening the doors” of a franchise establishment can be as high as $200,000.

KEY: pg 165
20. Perhaps the greatest advantage of buying a franchise, as compared to starting a new business or buying an
existing one, is that the franchisor will usually provide both training and guidance to the franchisee.

KEY: pg 163
7. Generally, the larger and more successful the franchisor, the greater the franchise fee that is charged.

KEY: pg 165
8. The prospective investor should get as much information as possible on the franchisor.

KEY: pg 164
9. Franchisees have the option of using the logo and symbols of the franchisor.
ANS: F PTS: NAT: AACSB Reflective Thinking | Strategy
1
KEY: pg 163
38. The term “upside gain and downside loss” refers to the profits the business can make and the losses
it can suffer.
ANS: T PTS: NAT: AACSB Reflective Thinking | Strategy

1
KEY: pg 155
11. The term “risk vs. loss” refers to the amount of return for funds invested.

1
KEY: pg 155
12. Business Brokers help entrepreneurs locate the funds necessary to start a business.

1
KEY: pg 156
40. The elimination of time and effort associated with starting a company is an advantage of acquiring
an ongoing venture.

1
KEY: pg 157
14. In purchasing an existing business the first question should be: “Why are you selling?”

1
KEY: pg 158
42. When purchasing an existing business, the prospective owner should conduct an assessment of
the current group of employees.

1
KEY: pg 160
16. The most important area to examine prior to purchasing a business is company profitability.

1
KEY: pg 161
17. It is always important that you weigh the advantages vs. disadvantages in purchasing a franchise.

1
KEY: pg 164
18. It is not uncommon for a buyer to be faced with a franchise fee of 250,000 to 1,000,000.
ANS: F
NAT: AACSB Reflective Thinking | Strategy
PTS: 1
KEY: pg 165
19. Much franchise litigation has arisen over termination of owners.
1
KEY: pg 167
20. The “Federal Trade Commission” does not provide information on franchise success.

1
KEY: pg 170
MULTIPLE CHOICE
1. When one designs a unique good or service, the individual is said to have used a(n) ____approach to
starting the business.
a. new-new c. old-new
b. old-old d. new-old
ANS: A PTS: 1 NAT: AACSB Reflective Thinking | Strategy
KEY: pg 150
2. When one discusses upside gain and downside loss, one is talking about
a. inventory turnover. c. asset pricing.
b. risk versus reward. d. liquidation pricing
ANS: B PTS: 1 NAT: AACSB Reflective Thinking | Strategy
KEY: pg 155
3. “Piggybacking” one’s way into business involves using a ____approach.

a. new-new c. new-old
b. old-new d. old-old
ANS: C PTS: 1 NAT: AACSB Reflective Thinking | Strategy
KEY: pg 150
4. Which of the following is not a key question a prospective buyer needs to ask in buying a business?
Why is the owner selling? c. How many of the personnel will remain with the firm?
b. What is the owner’s personal net worth? d. What type of competition exists?
KEY: pg 158
5. Which of the following is an intangible asset?

a. goodwill c. plant
b. inventory d. machinery
KEY: pg 159
6. An advantage to buying an on-going business is

a. reduced concern over future operations. c. it may be purchased at a bargain price.
b. time and effort are reduced d. all of the above.
ANS: D PTS: 1 NAT: AACSB Reflective Thinking | Strategy
This edition is intended for use outside of the U.S. only, with content that may be different
from the U.S. Edition. This may not be resold, copied, or distributed without the prior
consent of the publisher.
KEY: pg 157
7. A key question to ask when buying an on-going small business is which of the following?
a. How old is the business? c. Can you become a millionare by buying
this business?
b. Where should you retire someday? d. How many personnel are going to remain?
KEY: pg 160
8. When buying a business, competition must be investigated because

a. price competition may affect profits. c. competition may be spending more money
on advertising than you.
b. new competition may reduce market d. all of the above
share.
KEY: pg 160
9. Which of the following is a question which can be sidestepped when buying a business?
a. Where should the business be located? c. What pricing strategy should the firm use?
b. What types of customers does this store d. All can be sidestepped.
attract?
KEY: pg 157
10. Business related reasons for selling may include all but which of the following?
a. The owner may be in trouble with c. Changes in zoning which affect the
suppliers. business.
b. Changes in leasehold conditions. d. All of the above.
KEY: pg 158
43. An agreement not to compete is also known as

← a trade restriction clause. 46. a waiver of competition clause.
← a legal restraint of trade. 47. a deferential sale of business clause.
KEY: pg 159
12. Business related reasons for selling do not include which of the following?
a. The owner may be in trouble with c. Changes in the product supply chain.
suppliers.
b. Changes in leasehold conditions. d. Changes in zoning which affect the
business.
KEY: pg 158
13. The inventory should be examined for which of the following?

a. Salability c. Is it up to date?
b. Does a physical count correspond with the d. All of the above.
book count?
KEY: pg 159
5. A ____ is a system of distribution that enables a supplier to arrange for a dealer to handle a
specific product or service under certain mutually agreed upon condtions.
a. franchisee c. franchisor
b. franchise d. franchiser
KEY: pg 163
15. The individual who buys the franchise is the

a. franchisee. c. franchisette.
b. franchisor. d. franchatter.
KEY: pg 163
6. A franchise system can be used for handling

a. goods. 7. both of the above.
b. services. 8. none of the above.
KEY: pg 163
17. The person who gets the franchise is usually required to do all of the following except:
a. invest money in the operation. c. pay a fee.
b. maintain a specified quality of d. design a logo for the unit.
performance.
KEY: pg 163
8. The franchisee’s responsibilities include:

a. a financial investment. 10. engaging in a continuous business
relationship.
b. payment of a fee. 11. all of the above.
KEY: pg 163
10. The advantages of franchising include:

a. training and guidance. 11. proven track record.
b. brand-name appeal. 12. all of the above.
KEY: pg 163
20. The person who sells the franchise is usually required to do all of the following except:
a. pay a fee. c. help out with financial assistance.
b. provide professional management training d. provide continuing aid and a guidance to
to the unit’s staff. the person buying the franchise.
ANS: A PTS: NAT: AACSB Reflective Thinking | Strategy
1
KEY: pg 163
21. An advantage associated with franchising is

a. training and guidance provided by the c. track record of the other franchisees as
franchisor. proof of success
b. brand-name appeal of the franchise d. all of the above
ANS: D PTS: NAT: AACSB Reflective Thinking | Strategy
1
KEY: pg 163
22. The “right questions” the prospective small business owner should ask about a franchise deal with
a. the franchisor. c. the market.
b. the franchise. d. all of the above.
1
KEY: pg 158
23. Evaluating franchise opportunities include finding out more about which of the following?
a. the franchisor c. the franchisee
b. the franchise d. all of the above
KEY: pg 167
24. The UFOC contains how many sections:

a. 41 c. 9
b. 23 d. 100
KEY: pg 168
25. Which of the following costs add to the cost of franchising?

a. insurance c. legal and professional fees
b. payroll d. all of the above
KEY: pg 165
13. Coming up with a unique good or service is a _____approach, while adapting something that is currently
on the market or extending the offering to an area where it is not presently available is a(n)
_____approach.
a. new-new, old-old c. new-new, new-old
b. new-old, old-old d. new-old, old-new
ANS: C PTS: NAT: AACSB Reflective Thinking | Strategy
1
KEY: pg 150
27. Starting a business by adapting something already on the market is called what approach?
a. franchising c. new-new b. buying a new business d. new-
old
1
KEY: pg 150
28. When buying a small business you need to know all of the following items except:
a. the owner’s reason for selling. c. the financial picture of the business. b. the
competition in the area. d. the owner’s family stability and relationships.

1
KEY: pg 158
29. Reviewing personnel of the business about to be purchased is important in order to determine
a. whether employees with key skills will c. the cost of replacing an employee.
stay or leave.
b. if employees are leaving, will enough d. a, b, and c above
remain to operate the business.
1
KEY: pg 160
30. When this asset is purchased, the buyer should be sure to deduct those so old that they are deemed
uncollectible.
a. prepaid expenses c. accounts receivable
b. inventory d. equipment
KEY: pg 158
31. Business related reasons for selling may include all but which of the following?
a. The owner may be in trouble with c. Changes in zoning which affect the
suppliers. business.
b. Changes in leasehold conditions. d. All of the above.
KEY: pg 158
32. The extra value a business can command in a sale is known as

a. goodwill. c. market value.
b. saleable value. d. asset value.
KEY: pg 159
33. Competitor factors in a buying decision do not include

a. quality of the competition. c. age of the competition’s owners.
b. location of the competition. d. number of competitors.
KEY: pg 160
14. The individual who arranges for a dealer to handle a specific product or service under certain
mututally agreed upon conditions is known as the _____.
a. franchisee c. franchiser
b. franchisor d. franchisette
KEY: pg 163
35. The franchisor’s responsibilities include providing

a. company name. c. management and training.
b. symbols and logos. d. a, b, and c only.
KEY: pg 163
36. Which of the following is not a disadvantage of a major franchise?

a. franchise fees c. track record of the franchisor
b. control exercised by the franchisor d. awareness of some of the unfilled
promises from franchisors
KEY: pg 164
37. Which of the following costs do not add to the cost of franchising?
a. insurance c. legal and professional fees
b. prepaid utility bills d. opening product inventory
KEY: pg 165
38. After all of your investigation into a franchise, the final decision should be up to
a. your lawyer. c. you.
b. your financial backer. d. your accountant.
KEY: pg 171
39. Which is not a start-up expense?

a. Rent c. Supplies
b. Advertising d. Depreciation
KEY: pg 164
40. Which is not a key question to ask when buying a business?

a. Why is the business being sold? c. What is the condition of the inventory?
b. Is the building heated with gas or electric? d. How many of the employees will remain?
KEY: pg 158
14. The _____approach indicates the importance of people’s awareness of their daily lives for
developing new business ideas.
a. new-new c. old-new
b. old-old d. new-old
ANS: A PTS: NAT: AACSB Reflective Thinking | Strategy
1
KEY: pg 150
42. Which of the following are trends creating business opportunities?

a. green products c. health care
b. alternative energy d. all of the above
KEY: pg 151
43. What is the largest source of new business ideas among men?
a. Chance c. Hobby
b. Prior job d. Education courses
KEY: pg 152
44. What is the largest source of new business ideas among women?
a. Prior job c. Education courses
b. Hobby d. Chance
KEY: pg 152
45. What is an often overlooked asset when acquiring a new business?

a. Firm’s records c. Equipment
b. Buildings d. None of the above
KEY: pg 159
46. An analysis of the competition should look for ______.

a. opportunitites. c. unscrupulous practices.
b. weaknesses. d. None of the above
KEY: pg 160
47. Who must negotiate the final deal?

a. A lawyer c. The potential buyer
b. A CPA d. All of the above
KEY: pg 161
48. Have a seller retain a _____interest in the business.

a. minority c. 20%
b. majority d. 40%
KEY: pg 162
49. Which franchise is not included in the top ten franchises?

a. 7-eleven Inc. c. Pizza Hut
b. Subway d. Jimmy John’s
KEY: pg 164
50. Which is not a cost of franchising?
a. Insurance c. Payroll
b. Debt Service d. All are costs
1
KEY: pg 165
CHAPTER 7: LEGAL CHALLENGES OF ENTREPRENEURIAL VENTURES
TRUE/FALSE
1. Entrepreneurs should be knowledgeable about certain legal concepts that affect their business venture.
ANS: T PTS: 1 NAT: AACSB Ethics | Legal Responsibilities

KEY: pg 178
2. Laws governing intellectual property rights include copyrights, trademarks, and leases.
ANS: F PTS: 1 NAT: AACSB Ethics | Legal Responsibilities

KEY: pg 179
3. A patent is an intellectual property right.

KEY: pg 179
4. Design patents last for 20 years.

KEY: pg 179
5. Patents eventually expire.

KEY: pg 179
6. The patent process is not complex, and does not require careful planning.

KEY: pg 179
7. The two parts of a patent application are specification and claims.

KEY: pg 179
8. The object of a patent is to provide the holder with a temporary monopoly on his or her innovation.

KEY: pg 179
16. A copyright provides exclusive rights to creative individuals for the protection of their
artistic productions.

KEY: pg 182
20. Works created and copyrighted after January 1, 1978, are protected for the life of the author plus
70 years.
ANS: T PTS: NAT: AACSB Ethics | Legal Responsibilities

1
KEY: pg 182
11. Anyone who violates an author’s exclusive rights under a copyright is liable for infringement.

1
KEY: pg 182
12. Because of the “fair use” doctrine, it is sometimes difficult to establish infringement.

1
KEY: pg 182
13. Copyrights have to be registered with the Copyright Office.

1
KEY: pg 182
14. A trademark is a distinctive name, mark, or symbol that is identified with a company’s product.

1
KEY: pg 184
15. An example of a trademark is a logo.

1
KEY: pg 184
16. Once issued, the trademark is listed in the Principal Register of the Patent and Trademark Office.

1
KEY: pg 184
17. The registration of a trademark is for 40 years.
ANS: F PTS: NAT: AACSB Ethics | Legal Responsibilities

1
KEY: pg 185
18. Trademark registration and search is not costly.

1
KEY: pg 187
19. If infringement can be proven in court, an award may be given to the trademark holder.
ANS: T
NAT: AACSB Ethics | Legal Responsibilities
PTS: 1
KEY: pg 187
20. Every business at some point needs the services of an attorney.
1
KEY: pg 190
21. The Bankruptcy Act was set up in order to provide assistance to both debtors and creditors.

1
KEY: pg 199
22. Chapter 7, Chapter 9, and Chapter 11 are the most common forms of bankruptcy.

1
KEY: pg 200
23. Straight bankruptcy is often called liquidation.

1
KEY: pg 200
24. Chapter 13 bankruptcy involves a reorganization of the enterprise.

1
KEY: pg 200
25. Business owners normally prefer Chapter 7 bankruptcy over any other form of bankruptcy.

1
KEY: pg 201
MULTIPLE CHOICE
1. Items that can qualify for patent protection include all of the following except
a. machines. c. processes.
b. products. d. ideas.
ANS: D PTS: 1 NAT: AACSB Ethics | Legal Responsibilities
KEY: pg 184
2. Design patent protection lasts for _____ years.

a. 10 c. 14
b. 12 d. 20
ANS: C PTS: 1 NAT: AACSB Ethics | Legal Responsibilities
KEY: pg 189
3. Patents that are not design patents have _____ years of protection.
a. l5 c. 22
b. 20 d. 25
ANS: B PTS: 1 NAT: AACSB Ethics | Legal Responsibilities
KEY: pg 189
4. A patent gives the holder a temporary
a. profit. c. monopoly.
b. oligopoly. d. specification.
KEY: pg 179
5. There are two parts to a patent application, claims and .

a. percentage c. value
b. specification d. integration
KEY: pg 179
6. The two parts to a patent application are specification, and .

a. claims c. value
b. percentage d. perception
ANS: A PTS: 1 NAT: AACSB Ethics | Legal Responsibilities
KEY: pg 181
7. The text of a patent application is known as the

a. specification. c. concept.
b. particulars. d. value.
KEY: pg 179
8. The text of a patent application is known as the

a. presentable data. c. context.
b. claim. d. specification.
KEY: pg 179
9. That part of a patent application which identifies the features that are protected are known as the
a. particular. c. identification.
b. claim. d. essence.
KEY: pg 181
10. That part of a patent application which identifies the features that are protected are known as the
a. specification. c. claim.
b. illustration. d. concept.
KEY: pg 181
11. If an entrepreneur concludes that the innovation will withstand any legal challenge, a patent should be
a. dropped. c. integrated.
b. pursued. d. obfuscated
KEY: pg 182
21. To effectively pursue a patent, experts recommend that the entrepreneur

← handle all matters personally.
← prepare a realistic budget for infringement.
← fill out a preprinted form obtained from a patent office.
← sue as quickly as possible.
KEY: pg 179
13. The specification section of a patent application should include all of the following except
a. an introduction. c. a summary of invention.
b. examples and/or experimental results. d. a budget for handling infringement.
KEY: pg 179
39. In order to obtain a patent, an application should be filed with

← the Office of Government Publications.
← the Patent and Trademark Office of the Department of Commerce.
← Government Accounting Office.
← the United States Patent Office.
KEY: pg 182
15. What percentage of issued patents is commercially valuable?

a. a very small percentage c. 40 percent
b. around 20 percent d. 75 percent
KEY: pg 182
41. A person who loses an infringement battle in court may have to pay
← extra legal fees.
← damages of up to five times the actual amount.
← higher profits due to the infringement.
← the taxpayers back.
KEY: pg 182
43. An infringement budget deals with

← legal battles. 44. the outside molding of a building.
← government bribes. 45. advertising expenditures.
KEY: pg 179
18. The owner of the copyright may do all of the following except
a. reproduce the work. c. perform the work publicly.
b. sell the rights for a period of 200 years. d. display the work publicly.
ANS: B PTS: NAT: AACSB Ethics | Legal Responsibilities
1
KEY: pg 182
48. Anyone who violates an author’s exclusive rights under a copyright is liable for:
← a prison term.
← infringement.
← a monetary payment equal to proven damages.
← two times annual sales.
1
KEY: pg 182
20. For the author of creative material to obtain a copyright, the material must be in _____ form.
a. nontangible c. tangible
b. technical d. commercial
KEY: pg 182
21. Because of the doctrine, it is sometimes difficult to establish infringement.

a. fair use c. freedom of information
b. acquisition d. right to publish
KEY: pg 182
6. The determination of fair use of copyrights is based on

a. the effect of use on potential market.
b. the time period involved.
c. specific legal guidelines set forth by OSHA.
d. the GAD doctrine.
ANS: A PTS: NAT: AACSB Ethics | Legal Responsibilities
1
KEY: pg 183
7. Under copyright law, which of the following are the rights of the owner?
a. the right to reproduce work
b. the right to display the work of others
c. the right to perform any work they choose
d. the right to sell any work on the market as demand will bear
KEY: pg 189
24. Works created after January 1, 1978, have a copyright for the life of the author plus
a. 70 years. c. 14 years.
b. 50 years. d. 10 months.
KEY: pg 182
25. Copyrights may be expressed in

a. books. c. motion pictures.
b. periodicals. d. all of the above.
KEY: pg 182
26. The form of legal protection that computer programs fall under is
a. patents. c. copyrights.
b. trademarks. d. service marks.
KEY: pg 182
27. Copyrights can be placed on all of the following except

a. ideas. c. books.
b. lectures. d. music.
KEY: pg 182
28. A trademark is a distinctive _____ that is identified with a company’s product.

a. name c. TV ad
b. billboard d. storefront sign
KEY: pg 184
29. Which of the following is not a trademark?

a. a sales price c. a symbol
b. a logo d. a name
KEY: pg 184
30. Which of the following are not trademarks?

a. symbols c. names
b. mottos d. generic words
KEY: pg 184
9. Which of the following is a useful rule used to avoid pitfalls in selecting a trademark?
a. Trust a lawyer’s judgment.
b. Copy a competitor’s trademark.
c. Avoid abbreviations and acronyms.
d. Never choose a trademark without first conducting a trademark search.
KEY: pg 187
9. The registration of a trademark has a lifetime of

a. 20 years plus a 5-year renewable period. 11. 10 years plus a 10-year renewable period.
b. 25 years. 12. the lifetime of the author.
KEY: pg 185
12. Which of the following is a way in which a trademark may be invalidated?
a. cancellation proceeding
b. a competitor’s lawsuit
c. consumer loss of interest
d. once a trademark is established, no legal action can invalidate it
KEY: pg 186
13. The process of trademark registration is

a. expensive. 14. one that must be handled by a lawyer.
b. impossible. 15. inexpensive.
KEY: pg 187
35. All of the following are ways of invalidating a trademark except

a. cleaning-out proceedings. c. abandonment.
b. clearing-out proceedings. d. generic meaning.
KEY: pg 186
15. When seeking to invalidate a trademark, if a third party challenges the mark’s distinctiveness within
5 years of issuance, this is known as
a. abandonment. c. cleaning-out procedure.
b. cancellation proceedings. d. generic meaning.
KEY: pg 186
15. When trying to invalidate a trademark, if a party seeks to prove that the trademark has not been
used within six years of registration, this is known as
KEY: pg 186
38. When a party seeks to invalidate a trademark by showing that it has not been used for two consecutive
years, the party is making use of a legal approach known as
KEY: pg 186
39. When a trademark becomes the name of a general group of products or services, the trademark
protection may be lost because of
KEY: pg 186
40. The emerging body of law governing cyberspace is often referred to as:
a. netlaw. c. interlaw.
b. cyberlaw. d. legal web.
1
KEY: pg 187
16. Which of the following is an indicator that an entrepreneur’s business is failing?

a. other firms selling advanced products
b. retailer overstocked
c. liquidation
d. R&D budget proportionally less than competition
KEY: pg 200
42. Which is not one of the major sections of the bankruptcy act?
a. straight bankruptcy c. adjustments of debts
b. reorganization d. liquidation
KEY: pg 200
16. Which of the following are suggestions to minimize legal costs?

a. visit the lawyer during normal hours
b. have the lawyer custom design forms specifically for you
c. always handle matters personally
d. try to avoid hiring a lawyer if and until and emergency requires it
ANS: A PTS: NAT: AACSB Ethics | Legal Responsibilities
1
KEY: pg 203
17. Which of the following fall under Chapter 7 bankruptcy?

a. The debtor surrenders most property to a court trustee.
b. The debtor fails to file income taxes.
c. The debtor is relieved of obligations.
d. The debtor is arrested.
ANS: C PTS: NAT: AACSB Ethics | Legal Responsibilities
1
KEY: pg 200
21. A typical symptom of impending bankruptcy failure is when

a. new competition exits the market.
b. other firms seem to be selling products that are a generation ahead.
c. retailers always seem to be understocked.
d. the entrepreneur seeks to exit the market.
1
KEY: pg 199
46. When considering bankruptcy, entrepreneurs as sole proprietors normally prefer

a. Chapter 5. c. Chapter 11. b. Chapter 7. d. Chapter 13.
KEY: pg 200
SHORT ANSWER
19. Define a patent and describe its limitations.
ANS:
A patent is a right, granted by the government, of an inventor to protect an idea against infringement.
Patents can cover products, machines, and improvements on already patented things. A patent allows
the holder to have a temporary monopoly on his or her new creation. Design patents last for 14 years,
all others last 20 years. But, patents are expensive and time consuming to secure. Also, if a patent is
infringed upon, a court battle decides its validity. A patent can be invalidated for three reasons: A
patent holder may wait too long before asserting his or her rights, a patent may be misused, or a
patent may be proven not to meet patentability requirements.
PTS: 1 NAT: AACSB Ethics | Legal Responsibilities
20. What does a copyright protect and what are the guidelines for copyright protection?
ANS:
A copyright protects a person’s literary and artistic creations. Since 1978, a copyright gives protection
for the life of the creator plus 50 years. A copyright allows the holder to reproduce the work, prepare
copies, perform the work, and display the work. There are certain important guidelines for copyright
protection. It isn’t necessary to register copyrights unless you need to sue someone. Needless
registration only adds unnecessary time and effort. When buying material for internal use, it would be
reasonable to duplicate certain parts on occasion. But, duplicating entire pieces on a regular basis
would clearly violate a copyright holder’s rights. Care should be taken in using materials such as
catalogs. Materials that require a lot of expense to compile many times contain fictitious items to trap
people who merely copy material. It may be useful to copyright advertisements that may be of use to
competitors. Government documents cannot be copyrighted, but their format can. Therefore, you can’t
simply duplicate a page of text. And finally, use common sense in using copyrighted material. It is
illegal to rephrase another person’s material and call it your own.
21. What are the uses of trademarks and how can they be invalidated?
ANS:
A trademark is a distinctive symbol of a company. A trademark can be used to distinguish goods,
services, quality, and materials used. A trademark must be in some way unique to the object. A
trademark can be invalidated in any of four ways. A third party may challenge a trademark’s
distinctiveness within five years. A trademark owner may fail to file an affidavit stating a trademark’s
use or lack of use within six years of registration. An owner may fail to use a trademark for two
consecutive years without justification. And finally, a trademark may become synonymous with the
product itself.
4. What are the rules for avoiding pitfalls in selecting trademarks?
ANS:
Trademarks registration and research is expensive. Trademark infringement is even more expensive.
There are five basic rules to avoid difficulties with trademarks. A corporate name or mark should
never be selected without a trademark search. If your attorney recommends against a trademark for
legal reasons, trust his judgment. Try to find a unique name or mark. Use a distinctive logotype when
using a descriptive name for a product. When an abbreviation or acronym must be used, use a
distinctive logotype.
22. Name the three forms of bankruptcy and describe their functions?
ANS:
Bankruptcy was designed for three major reasons. One is to guarantee that assets will be fairly
divided among creditors. The second is to project debtors from losing too many of their assets. And
debtors are protected from unreasonable demands of creditors. There are three major sections of
bankruptcy for small business. Chapter 7 is straight bankruptcy, or liquidation. In Chapter 7, the
debtor forfeits all assets of a business, which a court-appointed trustee then sells. All receipts are then
divided among the creditors. Chapter 7 allows the debtor to be relieved of all obligations. Chapter 11
is known as reorganization. In this proceeding, the debtor pays a portion of the debt and the remainder
is relinquished. The debtor is then allowed to continue his or her venture.
Chapter 13 allows the debtor to repay the debt over a longer period of time. Chapter 13
avoids declaration of bankruptcy, and allows payment in installments, and protection by the
court.
CHAPTER 8: SOURCES OF CAPITAL FOR ENTREPRENEURS
TRUE/FALSE
17. Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of
the money.
ANS: T PTS: 1 NAT: AACSB Analytic | Environmental Influence

KEY: pg 210
2. The most common sources of debt financing are commercial banks.

KEY: pg 211
3. Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.

KEY: pg 213
21. Equity financing is money invested in the venture with legal obligations to repay the principal
amount of interest or interest rate on it.
ANS: F PTS: 1 NAT: AACSB Analytic | Environmental Influence

KEY: pg 214
5. Public offerings is a term used to refer to corporations taking public donations to raise capital.

KEY: pg 215
22. Because the advantages of going public outweigh the disadvantages, it is in a corporation’s
best interest to go public.

KEY: pg 215
40. History and nature of the company, capital structure, and description of any material contracts are
just a few examples of the specific detailed information that must be presented about a firm that is
going public.

KEY: pg 215
8. Private placement is a method of raising capital through the private placement of securities.

KEY: pg 216
42. Regulation D strengthened the regulations for reports and statements required for selling stock
to private parties, friends, employees, customers, relatives, local professionals.
ANS: F PTS: NAT: AACSB Analytic | Environmental Influence

1
KEY: pg 216
44. Sophisticated investors are wealthy individuals who invest more or less regularly in new and/or
early-and late-stage ventures.
ANS: T PTS: NAT: AACSB Analytic | Environmental Influence

1
KEY: pg 217
11. Venture capitalists are a valuable source of equity funding for new ventures.

1
KEY: pg 218
12. The venture capital pool is rapidly declining due to overfunding.

1
KEY: pg 219
13. Venture capitalists are quick to invest.

1
KEY: pg 220
14. Venture capitalists need little information before they make an investment.

1
KEY: pg 221
15. The business plan is a critical element in the new-venture proposal.

1
KEY: pg 224
16. There is no way for the venture capitalist to evaluate the new venture.

1
KEY: pg 222
46. To find the right venture capitalist, it is important for the entrepreneur to know what working on his
or her venture will be like.

1
KEY: pg 224
18. Venture capital firms want to own control of the firms in which they invest.

1
KEY: pg 220
19. Venture capitalists are usually satisfied with a reasonable return on investments.

1
KEY: pg 220
20. Venture capitalists are slow to invest.

1
KEY: pg 220
21. Venture capitalists need only basic summary information before they make a decision.

1
KEY: pg 221
49. One of the most frequently used criterion in evaluating new ventures, is the ability of the
entrepreneur to sustain intense effort.

1
KEY: pg 225
23. There is a small number of informal risk capitalists in the market today.

1
KEY: pg 228
7. Informal risk capitalists are those who have already made their money and now seek to help new
ventures.

KEY: pg 228
25. Informal risk capitalists are often referred to as “business angels.”

KEY: pg 228
MULTIPLE CHOICE
1. At start-up time, forms of financing includes all but which of the following.
a. equity c. equitable payback
b. private equity d. bank loans
ANS: C PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 214
2. Which of the following is (are) sources of capital for entrepreneurs:

a. equity c. auto leasing
b. debit d. credit cards
ANS: A PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 214
8. Many new ventures find that debt financing is

a. necessary. 10. not an important consideration.
b. a waste of time. 11. their major source of funds.
KEY: pg 211
4. Approximately how many commercial banks are there in this country?

a. 40,000 c. l7,000
b. 8,000 d. 20,000
ANS: B PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 211
10. Which of the following is not a question commonly asked by banks of entrepreneurs?
a. What do you plan to do with the money? c. What interest rate did you have in mind?
b. How much do you need? d. How will you repay the loan?
KEY: pg 211
6. When starting a business, which of the following sources of financing are least likely to be used?
a. trade credit c. leasing companies
b. factors d. insurance companies
ANS: D PTS: 1 NAT: AACSB Analytic | Environmental Influence
KEY: pg 214
7. When starting a business, which of the following sources of financing are most likely to be used?
a. trade credit c. leasing companies
b. factors d. insurance companies
KEY: pg 213
8. Which of the following would be most commonly used for short-term financing?
a. insurance companies c. finance companies
b. trade credit d. leasing companies
KEY: pg 214
9. Which of the following would be most commonly used for medium-term financing?
KEY: pg 213
10. Which of the following would be most commonly used for long-term financing?
KEY: pg 213
11. When accounts receivable are bought from a company for capital funding it is called
a. trade credit. c. leasing.
b. financing. d. factoring.
KEY: pg 214
12. Which of the following is not a type of debt financing?

a. private placement c. finance companies
b. trade credits d. accounts receivables
KEY: pg 214
13. A disadvantage of debt financing is

a. regular interest payments.
b. possible cash flow enhancement.
c. inhibition of growth and development due to equity investments.
d. relinquishment of ownership.
ANS: A PTS: NAT: AACSB Analytic | Environmental Influence
1
KEY: pg 212
13. Short-term debt is

a. paid back in six months.
b. paid back in one year.
c. paid back after sales.
d. paid back over an indefinite period of time.
KEY: pg 211
15. Which of the following is a type of equity financing?

a. convertible debentures c. loan with warrants
b. common stock d. loan without warrants
KEY: pg 215
14. AACSB Analytic | Environmental InfluenceThe most common source of debt financing is
a. trade credit. c. commercial banks.
b. factoring. d. finance companies.
ANS: C PTS: NAT: AACSB Analytic | Environmental Influence
1
KEY: pg 211
16. Advantages of debt financing include all of the following except:

a. low interest rates can justify the opportunity cost.
b. regular interest payments.
c. allows potential greater return on equity.
d. no relinquishment of ownership.
KEY: pg 212
16. Long-term debt is used for

a. start-up capital.
b. funding for purchase of property or equipment.
c. payment of payroll.
d. both a and b.
KEY: pg 211
16. When securing a bank loan an entrepreneur should be prepared to ANS which of the
following questions except?
a. When do you need it? c. What do you need it for?
b. How do you need it? d. What price is the price of your product?
KEY: pg 211
20. SEC stands for the

a. Stock Exchange Corporation. c. Standard Equity Commission.
b. Security and Exchange Commission. d. Source of Equity Company.
KEY: pg 215
21. When going public with public offerings an advantage might be

a. size of the company’s capital amount. c. the company’s market share.
b. the company’s size. d. the product price.
KEY: pg 215
17. SBIC stands for the

a. Small Business in Capital. 18. Small Business Investment Co.
b. Securities Bonds, Investment Co. 19. Sources Business Investment Co.
KEY: pg 217
17. Equity capital is

a. paid back within one year. 22. not a loan but a form of stock.
b. paid back after five years. 23. loans from family.
KEY: pg 215
24. Evaluation of new-venture proposals includes what processes except

a. oral presentation c. evaluation of the business plan
b. initial screening d. a product prototype
KEY: pg 226
25. One of the advantages of public offerings is
a. liquidity. c. requirements.
b. disclosure. d. cost.
KEY: pg 215
26. Which of these forms are not required by SEC?

a. proxy statements c. form 4-V
b. form 8-K d. form 10-Q
27. The SEC regulation D exemptions include all of the following except:
a. placements of up to $5 million. c. placements in excess of $5 million.
b. placements of less than $500,000. d. placements in excess of $l0 million.
KEY: pg 216
20. The main objective of regulation D is to

a. increase the investment in private placement.
b. regulate new small business investment.
c. make it easier and less expensive for small ventures to sell stock.
d. reduce debt financing by small enterprises.
1
KEY: pg 217
21. Which of the following is not one of the most common questions typically required to be answered
by entrepreneurs?
a. What do you plan to do with the money?
b. How much money do you need?
c. When do you need the money?
d. What exact date will you repay the money?
KEY: pg 228
30. Equity capital is often raised through:

a. public stock offerings. c. donations.
b. option sales. d. preferred issues.
KEY: pg 215
31. When going public some specific detailed information that must be presented includes
a. a 20 year plan. c. any financial conflicts of interest.
b. the capital structure of the company. d. any previous business failures.
22. Regulation D defines three separate exemptions that are based on the amount of money being raised.
Which is not a rule that accompanies these exemptions?
a. rule 503 c. rule 505 b. rule 504 d. rule 506

1
KEY: pg 216
23. Regulation D replaces the term “sophisticated investor” with the term “accredited
purchaser.” Included in this second category is/are
a. anyone buying at least $100,000 of the offered security.
b. institutional investors.
c. all tax-exempt organizations with at least $100,000 in assets.
d. general partners of any company.
ANS: B PTS: NAT: AACSB Analytic | Environmental Influence
1
KEY: pg 217
34. Venture capitalists are experienced professionals who provide a full range of service for new ventures
including
a. supplying labor for start-up. c. management consulting.
b. market research and strategy for pricing. d. R & D knowledge.
1
KEY: pg 218
23. Which of the following statements is true of the recent developments in the venture capital market?
a. in 1994 VC firms invested 20.9 billion dollars.
b. in 1999 the total pool of venture capital was $3 billion.
c. the venture capital market is currently experiencing a downturn.
d. the venture capital market peaked in 2001.
1
KEY: pg 219
23. There are four major trends in the venture capital field today. They include all of the following except
a. funds are less specialized and more homogenous.
b. emerging feeder funds.
c. a decrease in smaller start-up investment.
d. a new legal environment.
1
KEY: pg 219
24. Which of the following statements is not true about venture capitalists?
a. They want the entrepreneur and the management to run the company.
b. They expect high return on investments.
c. They are more interested in trying to manage the firm themselves than in as or products.
d. They take a long time to raise venture capital.
1
KEY: pg 220
38. Criteria that venture capitalists use in evaluating new venture proposals include:
25. the entrepreneur’s education.
26. the entrepreneur’s travel expenses.
27. the characteristics of the product or service.
28. when they will be paid back in full.
KEY: pg 223
39. Venture proposals are often rejected due to significant deficiencies in

a. the size of the proposal. c. available funds.
b. financial projection. d. both a and b.
KEY: pg 225
40. Which is not a stage of the evaluation process?

a. initial screening c. group discussion
b. evaluation of the business plan d. management integration
KEY: pg 226
26. Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?
a. Is the person someone with whom the entrepreneur can work?
b. Is the person a close relative?
c. Is the person wealthy?
d. Is the person a college graduate?
KEY: pg 228
42. The entrepreneur should ask the venture capitalist questions.

a. at most ten c. an unlimited number of
b. exactly twenty d. no
KEY: pg 228
27. Which is one of the seven most important questions for entrepreneurs regarding venture capitalists?
a What is it like to work with his firm?
b Is he or she a good communicator?
c Is he or she wealthy?
d is he or she good at financial computation?
1
KEY: pg 228
44. Criteria for evaluating new-venture proposals include all of the following except
a. the entrepreneur’s personality. c. the entrepreneur’s experience. b. the
entrepreneur’s age. d. financial considerations.
1
KEY: pg 223
g. Which of the following is a true statement about raising capital?
← All capital is raised through formal sources.
← All capital is raised through debt sources.
← Capital is easy to get.
← It often takes a great deal of time.
KEY: pg 215
46. How many people in America have net worth in excess of $1 million?
a. 100,000 c. 500,000
b. 200,000 d. l,000,000
KEY: pg 229
28. If 40 percent of the individuals with a net worth in excess of $l million were interested in
venture financing, how many millionaires would be available?
a. 120,000 c. 200,000
b. 150,000 d. 400,000
KEY: 229
29. An informal risk capitalist is referred to as:

a. your neighbor.
b. a business angel.
c. a retiree.
d. someone with extra money to invest but who is not interested becoming an entrepreneur.
KEY: pg 228
49. Informal investors find projects through

a. newspapers. c. commercials.
b. a network of friends. d. banks.
KEY: pg 229
50. What percentage of “angel capital” is devoted to seed a startup venture versus growth financing?
a. 60 percent c. 5 percent
b. 25 percent d. 100 percent
KEY: pg 230
SHORT ANSWER
32. What are the major types and uses of debt
financing? ANS:
Commercial bank loans are the most common source of debt. Banks typically loan for short to
intermediate terms and require security or collateral for the loan. Banks generally prefer to loan to
already existing firms rather than new start-up firms. Trade credit is given by the firm’s suppliers and
seen in the form of accounts payable. It is usually granted easily and is very short-term. Accounts
receivable financing uses the firm’s receivables as either collateral or as a product for sale, factoring.
It is short-term and offered mainly to existing firms. Finance companies make short- to intermediate-
term asset guaranteed loans. They deal mainly with existing firms and often make loans that a bank
would not. They also charge a hefty premium for this by having interest rates that are at least 2
percent over bank rates.
PTS: 1 NAT: AACSB Analytic | Environmental Influence
30. How does a public offering differ from a private placement?
ANS:
A public offering involves entering the stock exchange. Once the stock is publicly offered, anyone can
buy shares and, in turn, ownership. Public offerings are very expensive and highly regulated. These
disadvantages are offset by the large amounts of capital and liquidity the offerings can provide. A
private placement is used more often by small ventures. It allows the sale of the stock to private,
personally selected individuals. The Securities and Exchange Commission has enacted special rules to
make private placement easier and less expensive for small businesses. Both of these equity financing
plans differ from debt financing. They require a relinquishment of ownership, but don’t demand a
fixed payback of the invested principal.
31. As the venture capital market has experienced rapid growth, several market trends have
emerged. What are the major trends of today?
ANS:
One trend is specialized funds. As more firms are founded, their interests and focus become more
specialized. Another market trend concerns the emergence of feeder funds. These are funds that are
usually focused on seed-stage and start-ups. As these businesses grow, their business is fed back to the
large firms. There are also fewer start-up investments. Those partners with start-up knowledge are
spending their time trying to fix the numerous troubled ventures they already have. This doesn’t allow
them to devote the time needed in start-ups. The final trend concerns legal issues. Competition and our
“lawsuit” culture have forced highly legalized agreements.
32. Should entrepreneurs accept proposals from the first venture capitalist that offers?
ANS:
Entrepreneurs must evaluate their capitalist just as their capitalist evaluates them. Not every capitalist
is right for every entrepreneur, even if he or she does have the money needed. The entrepreneur must
look at the capitalist’s skills and knowledge, and decide how well they can work together, while
keeping in mind that venture capital is hard to come by.
5. Are formal firms the only source of venture capital?
ANS:
There are many individuals willing to invest where venture capitalists will not. These are usually
wealthy people looking for investments and are referred to as “business angels.” These people are
generally well off. They don’t need the high, immediate rate of return required by the venture capital
firms. They often seek social rather than purely financial returns on their investments.
CHAPTER 9: ASSESSMENT OF ENTREPRENEURIAL OPPORTUNITIES
TRUE/FALSE
1. During the last few years, the number of new start-up ventures is approximately 1500 per day.

KEY: pg 258
18. The entrepreneurial motivations of individuals relate to the entrepreneur, the environment, and
the venture.

KEY: pg 258
22. There is a great abundance of reliable data concerning the start-up, performance, and failure of
new ventures.

KEY: pg 259
4. Many entrepreneurs do not understand the marketing life cycle of a new product.

KEY: pg 259
5. Most entrepreneurs are objective when they evaluate their new idea.

KEY: pg 259
6. Most entrepreneurs are well schooled in the technology associated with their ventures.

KEY: pg 259
23. Pricing becomes less of a concern when customers become aware of a product’s unique
characteristics that are superior to the competition.

KEY: pg 259
8. Most entrepreneurs hire lawyers to brief them on the legal issues surrounding a new venture.

KEY: pg 261
9. There are five specific phases a new venture goes through.

KEY: pg 263
41. With a non-routine venture, the initial innovation will maintain the company’s competitive
advantage without new technology.

1
KEY: pg 264
11. In the life-style venture, independence, autonomy, and control are the primary driving forces.

1
KEY: pg 264
43. The decision of an entrepreneur to ignore the market is a safe one if he or she is sure that the idea will
be a success.

1
KEY: pg 265
13. The growth pattern of sales is critical for an entrepreneur to make correct forecasts.

1
KEY: pg 264
14. Only a small percentage of new ventures succeed.

1
KEY: pg 265
15. Timing has little to do with the success or failure of a new venture.

1
KEY: pg 265
45. Obtaining external financing is considered one of the major types of problems for a new
venture during its first year.

1
KEY: pg 266
47. Two important factors classified by Bruno as managerial that could be a cause for failure
include resource problems and team approach.

1
KEY: pg 265
18. Proper understanding of the market will help an entrepreneur avoid failure with a new venture.
PTS: 1
ANS: T
NAT: AACSB Analytic | Environmental Influence
KEY: pg 271
19. “Intensity of competition” changes the dominance of problem areas.
1
KEY: pg 267
50. Solid analysis and evaluation of the feasibility of the product/service idea are critical tasks in starting
a new business.

1
KEY: pg 269
21. A product does not have to be patented in order to be introduced into the marketplace.

1
KEY: pg 270
22. The evaluation process must be done by a research firm.

1
KEY: pg 269
8. Overall market understanding rather than time consuming focus on market niches is sufficient for
an evaluation.

1
KEY: pg 269
24. A feasibility criteria approach focuses strictly on the financial feasibility of a new venture.

1
KEY: pg 270
25. Feasibility analyses include the technical, market, financial, organizational, and competitive analyses.

KEY: pg 271
MULTIPLE CHOICE
1. It is reported that new firms have emerged in the United States every year since the early
1990’s.
a. 600,000 c. 22,000
b. 100,000 d. 230,000
KEY: pg 258
2. The entrepreneurial motivations of individuals usually relate to which of the following factors?
a. the environment c. the venture
b. the entrepreneur d. all of the above
PTS: 1
ANS: D
NAT: AACSB Analytic | Environmental Influence
KEY: pg 258
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S.
Edition. This may not be resold, copied, or distributed without the prior consent of the publisher.
3. Researchers have described a “fully developed new firm” with a number of characteristics including:
a. requires the full time commitment c. has not hired any individuals
b. has formal financial support d. a and b both apply
KEY: pg 259
4. Many entrepreneurs lack for their new venture.

a. innovation c. objectivity
b. intelligence d. both a and b
KEY: pg 259
5. Which of the following is critical to a product’s success?

a. timing c. objectivity
b. marketing approach d. all of the above
KEY: pg 259
6. When a customer sees a product that is superior to its competitors, ______ becomes less important.
a. size c. quantity
b. color d. price
KEY: pg 261
9. A new venture should be

a. cheap. 12. easy to copy.
b. unique. 13. inferior to its competitors.
KEY: pg 261
8. A common pitfall in selecting a new venture is

a. poor financial understanding. c. real insight into the market.
b. proper objective evaluation. d. none of the above.
KEY: pg 259
9. Timing is especially critical in which area?

a. the new venture profitability method c. accounting
b. marketing d. the economy
KEY: pg 259
10. Many entrepreneurs lack

a. knowledge of their product. c. drive.
b. venture uniqueness. d. the willingness to put in long hours.
KEY: pg 261
11. Name the pitfall described by the statement, “Engineers and technically trained people are
particularly prone to falling in love with an idea for a product or service.”
a. inadequate understanding of technical requirements
b. lack of venture uniqueness
c. no real insight into the market
d. lack of objective evaluation
KEY: pg 259
14. Poor financial understanding for an entrepreneur would be characterized by which of the following?
a. failure to anticipate technical difficulties
b. inadequate understanding of costs and funding requirements
c. failure to realize the life cycle of a product
d. lack of product differentiation
KEY: pg 259
13. A new venture must go through phases.

a. five c. three
b. two d. seven
KEY: pg 263
14. During the pre-start-up phase of a new venture, which of the following are among the crucial
five factors for success?
15. uniqueness of venture. 17. a & b.
16. expected growth. 18. price.
KEY: pg 263
17. Sales growth is a critical factor in the

a. pre-start-up phase. 17. start-up phase.
b. post-start-up phase. 18. evaluations phase.
KEY: pg 264
16. Many ventures fit into which of the following classifications?

a. hobby ventures c. high-growth ventures
b. smaller copycat ventures d. survival ventures
KEY: pg 264
18. Three specific phases that a new venture goes through are
a. pre-start-up, start-up, post-start-up.
b. start-up, post-start-up, evaluation.
18. beginning start-up, start-up, ending start-up.
19. pre-start-up, start-up, evaluation.
KEY: pg 263
20. Lack of finished product availability can affect

a. the company’s image. 24. both a and b.
b. the success of any venture. 25. costs.
KEY: pg 264
19. Ronstadt notes that the decision to ignore the market is

a. a smart one. c. an extremely risky one.
b. a fairly risky one. d. a critical one.
KEY: pg 265
20. Financial considerations play a major role in

a. lifestyle ventures. c. high-growth ventures.
b. smaller profitable ventures. d. corporate debentures.
KEY: pg 264
21. The amount of capital required to start a new venture .

21. can vary considerably depending upon the industry
22. is generally the same for all start-ups
23. is never available
24. will always be a small number
KEY: pg 264
22. Independence and autonomy are the major driving forces behind which of the following types
of ventures?
a. small unprofitable ventures c. life-style ventures
b. corporate ventures d. high-growth ventures
KEY: pg 264
23. The type of venture that is expected to attract venture capital would most likely be a
a. corporate venture. c. life-style venture.
b. high-growth venture. d. smaller venture.
KEY: pg 264
23. What is a critical consideration when assessing customer availability?

a. amount of products sold
b. length of time needed to determine who the customers are and what their buying habits are
24. the exact profitability of the venture
25. all of the above
KEY: pg 265
25. Bruno identifies which of the following as a factor contributing to new venture failure?
a. product/market problems. c. personality clashes.
b. family issues. d. good management/poor product.
KEY: pg 265
26. One of the external problems new ventures face is

a. vandalism c. government regulations
b. poor labor force d. market knowledge
KEY: pg 267
27. In recent studies of new venture problems, the most dominant problems at start-up were:
a. regulatory environment c. production/operations
b. sales/marketing d. none of the above
KEY: pg 266
28. In recent studies of new venture problems, the most dominant problems during the growth stage were:
a. sales/marketing c. regulatory environment b. organization design d. none
of the above
1
KEY: pg 266
24. Using the “Failure Prediction Model” illustrated in the chapter, the risk of failure can be reduced by:
a. using less debt as initial financing and generating revenue in the initial stages.
b. using more debt as initial financing and generating less revenue in the initial stages.
c. using more revenue to enhance more debt in the initial stage.
d. all of the above.
KEY: pg 268
30. Which of the following are major reasons for the failure of a new venture?
a. inadequate market knowledge c. opening in the wrong location
b. good product performance d. good product/poor marketing
KEY: pg 267
31. Product/market problems include which of the following?

a. venture capital relationship problems c. concept of a team approach
b. unclear business definition d. assuming debt too early
1
KEY: pg 265
32. Hiring and promotions on the bases of nepotism rather than qualification fall under the managerial
problem of
a. human resource problem. c. unclear business definition.
b. the concept of a team approach. d. poor management.
1
KEY: pg 265
24. A common human resource problem is

a. poor relationships with parent companies and venture capitalists.
b. incompetent support professionals.
c. inflated owner ego.
d. incompetent work force.
KEY: pg 266
34. Rapid technological advances in many industries cause a concern for in new venture
development.
25. faulty product performance
26. rapid product obsolescence
27. inadequate awareness of competitive pressures
28. undercapitalization
1
KEY: pg 271
35. When premature entry into the marketplace causes the failure of a new venture, it can be termed
a. poor timing. c. a design problem.
b. good timing. d. a distribution problem.
1
KEY: pg 265
29. A solid analysis is

a. a critical task in starting a new business.
b. of no importance.
c. no way to discover flaws in the new venture idea.
d. both a and c.
KEY: pg 269
37. Which of the following are key questions to ask when screening an idea?
a. Is it proprietary? c. What are its points of discussion?
b. Can it easily make money? d. All of the above are correct.
KEY: pg 270
38. The results of a profile analysis enable the entrepreneur to judge

a. himself or herself. c. the potential of the business.
b. the competition. d. venture capital opportunities.
KEY: pg 269
39. A checklist approach allows the entrepreneur to identify major strengths and weaknesses in
factors of a new venture.
a. the financial c. the organizational
b. the marketing d. all of the above
KEY: pg 270
27. Failure of a new venture can be avoided

a. by being a high risk taker. 28. through both a and c.
b. through a careful profile analysis. 29. through none of the above.
KEY: pg 270
41. In determining the potential market, one must look into the future.
a. one year c. ten years
b. three to five years d. three months
KEY: pg 270
h. Which of the following are questions an entrepreneur can ask to gain insight into the viability of
a venture?
a. Is it proprietary? c. Is the potential market large?
b. Are the initial production costs realistic? d. All of the above are correct.
KEY: pg 270
43. Functional design of the product and attractiveness in appearance are an aspect of
a. technical feasibility. c. marketability.
b. financial feasibility. d. organizational competence.
KEY: pg 271
29. The comprehensive feasibility approach is closely related to

a. the preparation of a thorough financial plan
b. initial customers
c. calendar times
d. good product design
KEY: pg 272
30. Market feasibility analysis relies

on a. organizational competence
33. the entrepreneur’s vision
34. venture capital
35. general economic trends and competitor data
KEY: pg 271
46. General sources for a market feasibility analysis include

a. reliability studies. c. pricing data.
b. statistical analyses. d. supplier data.
KEY: pg 272
31. In shaping the ultimate success or failure of a new venture, which of the following statements
applies the best?
a. A single strategic variable is usually responsible.
b. A single strategic variable is seldom responsible.
c. A single strategic variable will change.
d. A single strategic variable influences the entire outcome.
KEY: pg 269
48. Product design, reliability, and safety are all examples of

a. technical feasibility c. assessment of the entrepreneurial profile
b. market feasibility d. a good product
KEY: pg 271
49. Which evaluation method enables an entrepreneur to judge the potential of the business?
a. the entrepreneurial analysis method c. the profile analysis
b. the venture analysis method d. the net out-of-pocket cost method
KEY: pg 269
32. An approach developed as a criteria selection list from which entrepreneurs can gain insights into
the viability of their venture is the
a. feasibility criteria approach. c. marketability feasibility approach.
b. time-essence of a venture approach. d. comprehensive feasibility approach.
1
KEY: pg 270
SHORT ANSWER
33. Explain three major reasons why new ventures
fail. ANS:
The first reason new ventures often fail is poor timing for the start of a new venture. A new product
might be put on the market before a real need for the item exists or it may be introduced too late,
when there is little demand for the product. The second reason is rapid product obsolescence. The life
of a product needs to be assessed as important discoveries are always being made in updating the
product’s usefulness. The third reason is faulty product performance. Tests have not been conducted
appropriately for the product or quality has not been adequately controlled.
f. List and describe three pitfalls in selecting a new venture.
ANS:
The first pitfall in selecting a new venture is lack of objective evaluation. Ideas for products or
services lack the careful planning measures to bring them up to their proper potential. The second
pitfall is the lack of real insight into the market; a failure on the part of managerial staff to realize the
full potential and life cycle of the product from the beginning. The third pitfall concerns the lack of
venture uniqueness. There is no specific characteristic to set the business apart from competitors in the
same field.
32. What are three critical factors in a new venture assessment?
ANS:
One of the critical factors in a new venture assessment is the basic feasibility of the venture. A venture
has to operate within the realm of reality and it must also be a legitimate business venture. A second
critical factor is the buyer decisions in the venture. Decisions as to customer identification in terms of
location and specific classification of customers will be served by this venture. The third critical factor
is the competitive advantages of the venture. Basically, this is comparing a venture with the
competitors. The venture must have advantages that are not available to the competition’s realm of
business.
33. What are the five specific feasibility phases that a new venture will go through?
ANS:
The first phase is finding out technical feasibility. The feasibility measured is whether the product or
service will meet all technical criteria and tests for serviceability that are measurable. The second
phase concerns marketability. Different tests are used to assure the success of the product or service
rendered. This product must be salable and marketable to the public with a plan for promoting,
pricing, and distributing the product to consumers or customers. The third phase is financial
feasibility. Required finances are compared to available financial resources. The fourth phase deals
with organizational capabilities as far as the personnel needs and requirements. The final phase is the
competitive analysis of existing, as well as potential, competitors.
CHAPTER 10: MARKETING RESEARCH FOR ENTREPRENEURIAL VENTURES
TRUE/FALSE
19. Marketing research involves the gathering of information about a particular market, followed
by analysis of the information.
ANS: T PTS: 1
NAT: AACSB Communication | Environmental Influence KEY: page 287
2. The first step in marketing research is to gather primary data.
ANS: F PTS: 1
3. Information that has already been compiled is known as secondary data.
ANS: T PTS: 1
4. It is usually more expensive to gather secondary data than primary data.
ANS: F PTS: 1
5. Most firms generally gather primary data and then see if there is secondary data to supplement it.
ANS: F PTS: 1
6. Cost is often a major obstacle to marketing research for a new venture.
ANS: T PTS: 1
7. Only major strategic decisions need to be supported through marketing research.
ANS: F PTS: 1
23. Marketing research is sometimes irrelevant to a problem; however, it sometimes provides useful
information.
ANS: T PTS: 1
9. There are three distinct types of marketing philosophies that exist among new ventures.
ANS: T PTS: 1
10. A consumer driven marketing philosophy often relies on direct selling.
ANS: F PTS: 1
24. Shopping goods are products that consumers will take time to examine carefully and compare
for quality and price.
ANS: T PTS: 1
42. Marketing planning is the process of determining a clear, comprehensive approach to the creation
of customers.
ANS: T PTS: 1
44. A marketing information system compiles and organizes data according to a customer’s sex, age,
and geographic location.
ANS: F PTS: 1
14. Sales forecasting is a process of projecting future sales through educated guesses.
ANS: F PTS: 1
15. The greatest potential for internet marketing is with direct marketing.
ANS: T PTS: 1
46. Two major concerns with marketing on the Internet are unlimited target audiences and
customer resistance to change.
ANS: F PTS: 1
48. The web allows companies to gather and disseminate market information cheaper than
traditional methods.
ANS: T PTS: 1
51. Even after marketing research is done, many entrepreneurs are unsure of how to price their products
or services.
ANS: T PTS: 1
19. Pricing procedures are the same for all types of ventures.
ANS: F PTS: 1
MULTIPLE CHOICE
9. A market is
a. a group of consumers who have purchasing power and unsatisfied needs
b. a way of gaining consumer data
c. a segment of the economy
d. a group of known purchasers
ANS: A PTS: 1
2. The key to marketing analysis is

a. secondary data c. marketing research
b. psychographic information d. marketing response data
ANS: C PTS: 1
3. All of the following techniques are used in gathering primary data except
a. observational methods c. surveys
b. analysis of company financial records d. experimentation
ANS: B PTS: 1
4. In defining research objectives, the entrepreneur should include

a. local weather c. competitors research objectives
b. consumer tastes d. market experts
ANS: B PTS: 1
5. Surveys include contact by

a. mail c. personal interviews
b. telephone d. all of the above
ANS: D PTS: 1
6. Secondary data consists of

a. internal data only c. existing information
b. external data only d. newly developed primary research
ANS: C PTS: 1
7. Which of the following is not a method of collecting primary data?

a. review of government publications c. mail survey
b. telephone d. observation
ANS: A PTS: 1
8. Which of these is the most expensive to conduct?

a. phone surveys c. mail surveys
b. interviews d. all are of equal cost
ANS: B PTS: 1
10. When developing a survey, you should consider

a. including questions only pertaining to the study.
b. ask leading and biased questions.
c. giving concise but incomplete instructions.
d. the personality of the respondents.
ANS: A PTS: 1
10. Which one of these typically has the lowest response rate?
a. direct face-to-face contact c. phone survey
b. interviews d. mail survey
ANS: D PTS: 1
11. The primary reason many entrepreneurs fail to use marketing research is
a. high cost c. lack of time
b. ignorance d. lack of sophistication
ANS: A PTS: 1
12. Which of the following is a complex marketing research technique?

a. observation c. statistical analysis
b. telemarketing d. opinion
ANS: C PTS: 1
13. Which of the following is a marketing philosophy?

a. computer-driven philosophy c. consumer-driven philosophy
b. wholesale-driven philosophy d. cost-driven philosophy
ANS: C PTS: 1
14. The sales-driven philosophy

a. is based on the belief “produce efficiently and worry about sales later”
b. relies on research to discover consumer preferences before production begins
c. focuses on personal selling and advertising to persuade customers to buy the
company’s output
d. is strictly cost-driven
ANS: C PTS: 1
15. Which of the following influences the choice of marketing philosophy?

a. competitive pressure c. Dow Jones Industrial averages
b. economic outlook d. cost of living index
ANS: A PTS: 1
12. Market segmentation is

a. the process of categorizing products into different segments
b. the process of identifying a specific set of characteristics that differentiate one group
of consumers from the rest
c. the process of segmenting the sales force
d. heavily psychographic in nature
ANS: B PTS: 1
15. Marketing segmentation focuses on which variable?

a. characteristics the differentiate consumers
b. market share
c. cyclographic
d. profitability
ANS: A PTS: 1
18. All of the following are examples of consumer types except

a. late adopters c. innovators
b. early adopters d. laggards
ANS: A PTS: 1
19. Which of the following would be last to adopt a new product?

a. early majority c. innovators
b. early adopters d. laggards
ANS: D PTS: 1
20. Which of the following are the two major variables needed to identify specific market segments?
a. demographic and benefit. c. geographic and benefit.
b. demographic and geographic. d. economic and financial.
ANS: A PTS: 1
21. Which of the following is a demographic variable?

a. weight c. attitude
b. hair color d. income
ANS: D PTS: 1
22. Products that consumers will take time to examine carefully and compare for quality and price are
a. convenience goods c. specialty goods b. shopping goods d.
generic goods
ANS: B PTS: 1
23. Products or services that consumers make a special effort to find and purchase are
a. convenience goods c. specialty goods
b. shopping goods d. generic goods
ANS: C PTS: 1
24. Which of the following is part of the marketing planning process?

a. market niche c. marketing research
b. market segmentation d. marketing myopia
ANS: C PTS: 1
15. The purpose of marketing research

a. is to gain customers
b. is to identify customer’s target markets and to fulfill their desires
c. to keep costs low
d. to develop new products
ANS: B PTS: 1
17. A marketing information system compiles and organizes data relating to _______ from the
customer base.
a. price c. demand
b. revenue d. supply
ANS: B PTS: 1
NAT: AACSB Communication | Environmental Influence KEY: pg 301
27. Which of the following is not a key factor affecting a marketing information system?
a. size of the system c. timeliness of the reporting system
b. usefulness or understandability of data d. relevancy of data
ANS: A PTS: 1
28. What element promotes and distributes products according to market research findings?
a. marketing research c. sales research
b. marketing plans d. cost analysis
ANS: C PTS: 1
18. What part of the marketing plan emphasizes the factors that contribute to a firm’s competitive edge?
a. appraisal of marketing strengths and weaknesses
b. development of marketing strategies
c. determining pricing structures
d. conducting market research.
ANS: A PTS: 1
19. What part of the marketing plan strategies begins with identifying the end users, wholesalers, and
retailers, as well as their needs and specifications?
a. product/service c. pricing structure
b. marketing d. competitive focus
ANS: A PTS: 1
31. The final critical factor in the marketing-planning process is

a. analysis c. sales forecasting
b. cost projection d. evaluation
ANS: D PTS: 1
32. Which of the following is not an Internet marketing advantage?

a. information transfer c. cultivate new customers
b. product demonstration d. limited target audience
ANS: D PTS: 1
33. Traditional marketing techniques tend to be _____ oriented, while the Internet is _____ oriented.
a. seek, maintain c. push, pull
b. seek, pull d. pull, push
ANS: C PTS: 1
34. The greatest future benefit from marketing on the internet lies in:
a. provide a business/firm description c. registering the domain name
b. direct selling d. making the site interactive
ANS: B PTS: 1
19. Internet marketing involves sharing information about the company with customers and
a. allows companies to sell customer information
b. copy catting
c. allows companies to slightly mislead customers
d. allows companies to gather information from customers
ANS: D PTS: 1
19. Among the numerous advantages of Internet marketing, two major concerns have arisen.
a. limited target audience and consumer resistance to change
b. unlimited target audience and consumer resistance to change
c. limited target audience and demographics
d. demographics and unlimited target audience
ANS: A PTS: 1
37. Which of the following factors affects pricing strategies?

a. degree of competitive pressure c. the management structure
b. the government d. how good the product is
ANS: A PTS: 1
38. Sometimes, consumers associate a higher price with

a. higher quality c. discounters
b. limited supply d. a complex product
ANS: A PTS: 1
SHORT ANSWER
20. How would you characterize your markets?
ANS:
Applying criteria to your best customers makes sense for the smallest of businesses, and asks how
each one can be more thoroughly characterized for the individual and the business. Examples of
individual characteristics include age, gender, race and ethnic group, hobbies, lifestyle, education,
social class, occupation, and income level. Business definitions include the kind or type of business
(manufacturing, wholesale, service, or retail), location, structure, sales level, distribution patterns, and
number of employees.
PTS: 1 NAT: AACSB Communication | Environmental Influence
21. How can an entrepreneur find more people (businesses/buyers) like the ones he or she already has?
ANS:
This question is a key to future business strategies. An entrepreneur must continually look for more
customers to replace those lost through normal attrition, and focus on becoming acquainted with
new potential customers who are candidates for frequent returns.
26. How will you attract and keep these
markets? ANS:
The initial response to this question comes from the ANS the question reveals, however, the basis
should have already been thought of in the initial business plan. The development of the ANS
should involve such questions as how and where to advertise, the stability of the business’s location,
the attractiveness and accessibility of the store, and the fit between your business and your chosen
markets.
25. How can an entrepreneur expand his or her markets?
ANS:
Because it is difficult to expand before you attract, the entrepreneur must not only focus on new
customers but realize when his or her market has become large enough to bring in new merchandise
or other services to satisfy new and returning customers. Continual research is effective in this area.
Many times customers find new products or ideas that are innovative and hence, potential profit
makers.
23. Why do they buy from one entrepreneur and not from the competition?
ANS:
Strategy is probably one of the most difficult things to determine for an entrepreneur. It has been my
experience that one must always keep the investor/customer in mind when beginning a business.
The more sacrifice customers see or receive from a business the more often they will return. There
are many benefits a business can pass along to its customers that other competitors may or may not
be willing to risk.

Chapter 1: Entrepreneurship: Evolutionary Development-Revolutionary Impact

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CHAPTER 1: ENTREPRENEURSHIP: EVOLUTIONARY

1. Entrepreneurs are aggressive catalysts for change within the marketplace.

2. Entrepreneurs are not heroes in today’s marketplace.

4. Entrepreneurship is more than the mere creation of a business.

7. The entrepreneurial spirit is unique to America and Western Europe.

13. Gazelles are almost always high tech.

14. Gazelles do not always get venture capital funding.

18. There is no single definition of an entrepreneur.

22. Most entrepreneurs are inventors.

23. An entrepreneur needs neither a lot of money nor luck.

25. Entrepreneurs are high risk takers.

26. Entrepreneurs always start their business at a young age.

27. Characteristics of entrepreneurs can neither be taught nor learned.

28. Entrepreneurs are born not made.

29. Entrepreneurs are doers not thinkers.

30. Entrepreneurs must fit the “profile.”

40. “Great chef” strategies focus on unique markets.

41. Entrepreneurship involves an interdisciplinary approach.

1. Entrepreneurs are best characterized as:

3. Entrepreneurs will always be

6. Which of the following statements best describes a “gazelle?”

7. Gazelles have been responsible for which of the following:

8. ______________ is the economic basis for all entrepreneurial activity.

10. The entrepreneur is one who

11. Which of the following characteristics is most important to an entrepreneur?

14. Which is not one of the chief characteristics of an entrepreneur?

15. Entrepreneurial traits include which of the following?

17. Which of the following concepts is entrepreneurship considered synonymous with?

21. Which of the following traits is not that of an entrepreneur?

22. Which of the following is not a common myth about entrepreneurs?

23. Which statement is not true?

24. Most entrepreneurs should be categorized as

25. Which of the following statements is true?

27. Entrepreneurship has become synonymous or closely linked with:

28. Michael Gerber, the author of The E-Myth, contends:

30. Entrepreneurs always

34. In the study of contemporary entrepreneurship, one concept reoccurs:

35. The macro view of entrepreneurship presents factors exhibiting a strong

36. Entrepreneurs are accurately described in which way?

37. 3M’s Post-it notes are an example of the

41. The micro view is divided into which three theories?

44. Water well strategies refer to:

45. Mountain gap strategies refer to:

46. The process approach to entrepreneurship seeks to

47. The dynamic states model depicts ventures as

1. Describe entrepreneurs and entrepreneurship in today’s

Entrepreneurship is an integrated concept that permeates an individual’s business in an innovative

PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics

PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics

PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics

1. Name and describe four of the ten major myths of

PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics

2. List and categorize the schools of entrepreneurial thought.

PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics

PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics

4. Provide a comprehensive definition of

PTS: 1 NAT: AACSB Reflective Thinking | Individual Dynamics

16. Determining a person’s “entrepreneurial perspective” is an exact science.

5. The Academy of Management Review is an example of a journal used in entrepreneurial research.

6. Government publications are used in researching small business.

8. Good entrepreneurs seek feedback from others.

9. A good trait for an entrepreneur is to be a calculated risk taker.

11. Entrepreneurs do not need foresight.