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Chapter 06
Entrepreneurship
True / False Questions
6-1
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1. An entrepreneur is not a manager but engages in additional activities that all managers do.
True False
2. Entrepreneurs operate in a formal management hierarchy with well-defined authority and

responsibility.
True False
3. Managers usually prefer to own assets, whereas entrepreneurs often rent or use assets on a
temporary basis.
True False
4. A small business differs from an entrepreneurial venture.
True False
5. Managers are quicker to act and actively manage risk, while entrepreneurs often are slower
to act and tend to avoid risk.
True False
6. A small business is often defined as having fewer than 100 employees, as well as being
independently owned and operated.
True False
7. Laura independently owns and operates Kites Inc., a company with 45 employees. She tends
not to manage particularly aggressively and expects moderate sales, profits, and growth.
Laura's company is considered an entrepreneurial venture.
True False
6-2
8. Corporate managers who create new independent businesses with the benefit of corporate
support are known as intrapreneurs.
True False
9. Entrepreneurs are essentially gamblers.
True False
10. Entrepreneurs experience stress, but they also have high job satisfaction.
True False
11. Entrepreneurs start their own firms because of the challenge, profit potential, and enormous
satisfaction they hope lies ahead.
True False
12. Observers say that in contemplating one’s business, one must start with a great idea.
True False
13. Entrepreneurs spot, create, and exploit opportunities.
True False
14. Calamities such as wars and natural disasters can provide opportunities for entrepreneurs.
True False
6-3
15. A franchisor is an innovator who has created at least one successful store and seeks partners
to operate the same concept in other local markets.
True False
16. In the transaction fee model, a website brings buyers and sellers together and charges a
commission for each sale.
True False
17. Entrepreneurs are not tolerant of stress and find it difficult to resolve problems.
True False
18. In the context of the entrepreneurial strategy matrix, most small business ventures are in the
lower right quadrant where innovation is low and risk is high.
True False
19. Start-ups have at least two major liabilities: newness and fast growth.
True False
20. Business incubators, often located in industrial parks or abandoned factories, are protected
environments for new, small businesses.
True False
21. As the business grows, entrepreneurs often hesitate to delegate work they are used to
doing.
True False
6-4
22. A common entrepreneurial malady is an aversion to record keeping.
True False
23. A business plan describes only the basic idea involved in starting a new venture.
True False
24. When a business goes wrong, nonprofessional investors are less helpful and less likely to
advance more money.
True False
25. Social capital refers to being part of a social network and having a good reputation.
True False
26. Today's large corporations are passive bystanders in the entrepreneurial explosion.
True False
27. In the context of building intrapreneurship, skunkworks are project teams designated to
produce a new, innovative product.
True False
28. Organizations that encourage intrapreneurship face the obvious risk of failure.
True False
6-5
29. The successful intrapreneurial organization avoids relying on its entrepreneurial spirit to
produce at least one winner from among several projects.
True False
30. CEOs play a crucial role in promoting entrepreneurship within large corporations.
True False
Multiple Choice Questions
31. The pursuit of lucrative opportunities by enterprising individuals under conditions of

uncertainty is known as:
A. entrepreneurship.
B. sugging.
C. bootlegging.
D. skunkworks.
E. incubation.
32. The process by which enterprising individuals initiate, manage, and assume the risks and
rewards associated with a business is known as a(n):
A. start-up.
B. corporation.
C. governmental agency.
D. entrepreneurial venture.
E. joint venture.
6-6
33. A business having fewer than 100 employees, independently owned and operated, not
dominant in its field, and not characterized by many innovative practices is a(n):
A. nonprofit organization.
B. small business.
C. greenfield venture.
E. incubator.
34. A(n) _____ is a new business having growth and high profitability as primary objectives.
A. angel investment
B. junior enterprise
C. small enterprise
D. entrepreneurial venture
E. greenfield venture
35. While working at a software company, Ronald has created a new venture based solely on his
idea while using his company’s proprietary technology. Ronald can be described as a(n):
A. intrapreneur.
B. angel investor.
C. quasi partner.
D. venture capitalist.
E. social worker.
6-7
36. _____ are new venture creators working inside big companies; they are corporate
entrepreneurs, using their company’s resources to build a profitable line of business based
on a fresh new idea.
A. Intrapreneurs
B. Entrepreneurs
C. Sole proprietors
D. Management novices
E. Licensees
37. Your roommate wants to start a business and everybody has been giving her various kinds of
advice about being an entrepreneur. Which of the following statements is true of
entrepreneurship?
A. Any entrepreneur with a good idea can raise venture capital.
B. Entrepreneurs are their own bosses and independent.
C. Entrepreneurs “get rich quick” and enjoy a lot of leisure time.
D. Entrepreneurs take careful, calculated risks and are not afraid to act on those decisions.
E. If an entrepreneur is talented, he or she will quickly succeed.
6-8
38. Eddie was a manager at a company that produced household appliances. He had many
innovative ideas to increase profit. However, his ideas were not received well by the
company. So, he left the company to pursue his own business. His new business is known as
a(n):
A. entrepreneurial venture.
B. spin-off.
C. corporate espionage.
D. skunkwork.
E. angel investment.
39. Laura recently started her own business. She has nearly recreated a company she worked for
previously. But, she has great business acumen and has been able to run her business much
more efficiently and profitably. Laura is a(n):
A. promoter.
B. entrepreneur.
C. manager.
D. intrapreneur.
E. inventor.
40. When creating a new business one should start with:
A. a viable market.
B. a product.
C. a great idea.
D. good timing.
E. meeting social responsibilities.
6-9
41. Laura, an enterprising individual, wants to open a store in her town. She wants her store to
be of the same type as a popular coffee chain that is successfully operating in a city nearby.
Laura wants to become a(n):
A. business incubator.
B. innovator.
C. angel investor.
D. franchisee.
E. intrapreneur.
42. In the context of successful business models for e-commerce, the _____ model involves
charging fees to direct Internet website visitors to other companies' websites.
A. transaction fee
B. advertising support
C. intermediary
D. affiliate
E. subscription
charging monthly or annual fees for Internet website visits or access to website content.
A. transaction fee
C. intermediary
D. affiliate
E. subscription
6-10
44. eBay brings buyers and sellers together and charges a commission for each sale. This type of
business model is known as a(n):
A. transaction fee model.
B. advertising support model.
C. intermediary model.
D. affiliate model.
E. subscription model.
45. The side street effect refers to:
A. the appearance of unexpected opportunities as one follows a plan.
B. a corporate spin-off not sanctioned by the corporation.
C. using corporate resources to pursue entrepreneurial activities.
D. entrepreneurial ventures that are marginally successful but never experience significant
growth.
E. the lack of focus seen in many entrepreneurs.
46. Entrepreneurs may be able to capitalize on _____ that refers to finding unexpected
opportunities after heading down a road, even if their original idea does not work.
A. the demographic changes
B. the side street effect
C. bootlegging
D. skunkworks
E. advertising support
6-11
47. Which of the following characteristics helps an entrepreneur succeed?
A. Commitment to family welfare
B. Tolerance of risk, ambiguity, and uncertainty
C. Refusal to take risks
D. Maintaining status quo
E. Inability to resolve problems
48. Cambridge Counseling, an entrepreneurial venture, does not have any distinctive services
when compared with the well-established competitors in the field, and the business will
require a sizable investment. Which quadrant of the entrepreneurial strategy matrix will the
venture be placed?
A. High innovation/low risk
B. High innovation/high risk
C. Low innovation/low risk
D. Low innovation/high risk
E. Medium innovation/low risk
49. Most small business ventures are located in (the) _____ quadrant(s) of the entrepreneurial
strategy matrix.
A. upper left
B. lower left
C. upper right
D. lower right
E. upper left and upper right
6-12
50. In the context of the entrepreneurial strategy matrix, a novel product idea that involves a
large financial investment would be described as:
A. high innovation/low risk.
B. high innovation/high risk.
C. low innovation/low risk.
D. low innovation/high risk.
E. low innovation/no risk.
51. In the context of the entrepreneurial strategy matrix, which of the following products is most
likely to have the highest risks and returns?
A. Velcro fasteners
B. Tax preparation service
C. New pharmaceutical drug
D. New restaurant
E. Lawn mowing service
52. Which of the following is true of entrepreneurial ventures?
A. Companies offering mundane products cannot hope to gain competitive advantage.
B. For start-ups, failure is an exception rather than the rule.
C. Successful companies do not always require a cutting-edge technology or an exciting new

product.
D. Acquiring venture capital is essential to the success of most start-up businesses.
E. The odds of survival of an entrepreneurial venture worsen if it grows to at least 10 or 20

people.
6-13
53. Which of the following improves the odds of survival of a venture?
A. Economic downturn
B. Newness
C. Smallness
D. Risky market
E. Revenues of $2–3 million
54. _____ are protected environments for new, small businesses offering low rents and shared
costs.
A. Skunkworks
B. Business incubators
C. Spinoffs
D. Bootleggings
E. Global start-ups
55. Which of the following is a benefit of business incubators?
A. Free rent
B. High security
C. Provision of venture capital
D. Access to shared services
E. Guaranteed profitability
6-14
56. In the context of common management challenges, leadership deteriorates into
micromanagement when entrepreneurs fail to:
A. train a successor.
B. monitor financial performance.
C. delegate work.
D. enjoy work.
E. plan for contingencies.
57. The success of entrepreneurial venture is often jeopardized by the death of the founder.
Which of the following is an important measure to minimize this problem?
A. Conservative use of funds
B. Succession planning
C. Record keeping
D. Decreased delegation
E. Going public
58. _____ offer a way for a business to raise capital through federally registered and underwritten
sales of shares in the company.
A. Initial public stock offerings
B. Venture capital funds
C. Skunkworks
D. Bootleggings
E. Franchises
6-15
59. In order for family-managed businesses to survive and prosper, management guru Peter
Drucker advised them to:
A. grow as aggressively as possible.
B. discontinue hiring family members.
C. fill at least one key position with a nonfamily member.
D. offer initial public stock offerings as soon as possible.
E. tolerate mediocre performance by family members.
60. According to Peter Drucker, which of the following is true with respect to managing a family
business?
A. Mediocre performance by family members employed in the company may be tolerated.
B. The business should be aggressively managed.
C. The business should not hire family members, despite good qualifications.
D. Someone outside the family and the business should help plan succession.
E. The business should “go public” as soon as possible.
61. Entrepreneurs, in part because they are very busy, often fail to use _____, resulting in
inadequate margins to support growth.
A. formal control systems
B. a forward-thinking orientation
C. opportunity analysis
D. venture capital
E. total quality management systems
6-16
62. In the context of starting an entrepreneurial venture, the first formal step is:
A. secure the finances.
B. writing a business plan.
C. conducting an opportunity analysis.
D. getting others to support your ideas.
E. hiring the right people.
63. A description of the good or service, an assessment of the opportunity, an assessment of the
entrepreneur, specification of activities and resources needed to translate the idea into a
viable business, and the source(s) of capital together make up a(n):
A. business plan.
B. control system.
C. opportunity analysis.
D. business audit.
E. organization chart.
64. Which of the following is the purpose of an opportunity analysis?
A. To obtain financing
B. To negotiate agreements with suppliers
C. To excite potential customers
D. To specify resources needed to translate the idea into a viable business
E. To work out the details of marketing, finance, and manufacturing
6-17
65. A(n) _____ describes all the elements involved in starting a new venture.
A. business plan
B. control system
D. initial public stock offering
E. organization chart
66. Which of the following is a function of business plan?
A. To serve as filters to separate unimportant matters from important ones
B. To raise capital through federally registered shares of the company
C. To contribute to the upliftment of company standards
D. To ensure the success of the business
E. To create a long-term relationship with an investment banking firm
67. Which of the following devotes too much attention to financial projections while neglecting
other important information that is important to investors?
A. Business audit
B. Accounting analysis
C. Business plan
D. Opportunity analysis
E. Business incubator
6-18
68. Which of the following key planning elements involves a competitive advantage that can be
defended and should be focused on customer?
A. Opportunity
B. Risk and reward
C. People
D. Competition
E. Context
69. People’s judgment of a company’s acceptance, appropriateness, and desirability, generally

stemming from company goals and methods that are consistent with societal values is known
as:
A. social capital.
B. bootlegging.
C. legitimacy.
D. skunkworks.
E. side street effect.
70. A competitive advantage from relationships with other people and the image other people
have of the entrepreneur is known as:
A. social capital.
B. bootlegging.
C. legitimacy.
D. skunkworks.
6-19
71. As an organization grows, the successful entrepreneur will:
A. retain control over all research operations.
B. run the company single-handedly.
C. make all major decisions.
D. develop an effective top management team.
E. apply only his personal theories to business.
72. The first step toward building organizational support for an idea that involves explaining the
idea and seeking approval to look for wider support is known as:
A. making cheerleaders.
B. bootlegging.
C. horse trading.
D. clearing the investment.
E. getting the blessing.
73. Guaranteeing the project's technical and political feasibility, often with a formal presentation
to higher management, refers to which of the following stages for building support for an
idea?
A. Making cheerleaders
B. Bootlegging
C. Horse trading
D. Clearing the investment
E. Getting the blessing
6-20
74. "Loading the gun", or lining up ammunition in support of one’s idea, is a phrase used by
managers at General Electric that parallels which stage of building support for an idea?
B. Bootlegging
C. Horse trading
75. Amanda, a manager, decides to offer her support to Jason, one of her subordinates, on a new
project in exchange for a share of the payoffs. In the context of entrepreneurship, this
practice is known as:
B. bootlegging.
C. horse trading.
76. Orlando works as a technician for a large manufacturer of biomedical equipment. Orlando has
discovered a way to produce disposable products in large quantities that will be useful in
research facilities. His employer has given Orlando and a selected team of researchers the
resources to develop this idea. This project is referred to as:
A. a spin-off.
B. a skunkwork.
C. bootlegging.
D. horse trading.
E. sponsorship.
6-21
77. Informal efforts, as opposed to official job assignments, in which employees work to create
new products and processes of their own choosing and initiative are known as:
A. spin-offs.
B. skunkworks.
C. bootlegging.
D. horse trading.
E. sponsorship.
78. Miguel works as a technician for a large manufacturer of biomedical equipment. He has
discovered a technique to produce composite materials more efficiently. The company
encourages its employees to pursue new ideas on company premises. Which of the following
does Miguel’s company support?
A. Bootlegging
B. Skunkworks
C. Spin-offs
D. Delegation
E. Corporate espionage
79. Successfully fostering and managing intrapreneurship involves:
A. discouraging bootlegging activities.
B. focusing on one very large, innovative project.
C. rewarding risk taking.
D. spreading intrapreneurial efforts over many small scale projects.
E. minimizing aggressiveness with competitors.
6-22
80. The most dangerous risk in intrapreneurship is that of:
A. spreading intrapreneurial efforts over too many projects.
B. over relying on a single large project.
C. working on too many underfunded projects.
D. limiting one’s personal energy to certain tasks.
E. engaging in prospects that are too risky.
81. The tendency of an organization to engage in activities designed to identify and capitalize
successfully on opportunities to launch new ventures by entering new or established markets
with new or existing goods or services is known as:
A. entrepreneurial orientation.
B. oligopolistic behavior.
C. cartelism.
D. bid rigging.
E. spinning off.
Essay Questions
6-23
82. Distinguish between a small business and an entrepreneurial venture.
83. What are some of the reasons why people become entrepreneurs?
6-24
84. Describe the differences between entrepreneurs, inventors, promoters, and managers.
85. In the context of the opportunity for starting a business, what are some of the possibilities
that entrepreneurs can exploit?
6-25
86. What are the five business models that have proven successful for e-commerce?
87. Describe some of the characteristics that make a person more likely to succeed as an
entrepreneur.
6-26
88. In the context of the entrepreneurial strategy matrix, describe the four kinds of new
ventures.
89. Describe some of the major management challenges associated with entrepreneurship.
6-27
90. Describe the five key planning elements used in developing the best business plans.
91. Describe the five tendencies that determine entrepreneurial orientation.
6-28
Scenario A. Use the information in the following paragraph to answer the following questions.
Your roommate comes in after class to tell you, with great excitement, that she has decided
to become an entrepreneur. Her reasons are these: First, she is something of a gambler, so
she believes entrepreneurship is a perfect match for her personality. Second, she is an
admitted "control freak". She is confident that all it takes is a good idea and that money will
surely follow. Finally, she made 650 on her SATs so her success, she feels, is a certainty.
92. Your roommate has accurately described some of the _____ of/about entrepreneurship.
A. challenges
B. opportunities
C. realities
D. myths
E. facts
93. In the context of the given scenario, which of the following is true?
A. She may not be successful if she starts an entrepreneurial venture based on myths.
B. She will be successful because she accurately understands the role of entrepreneurs.
C. She will never be successful.
D. She will be successful because she is smart and talented.
E. There is no way to assess her chances of success.
6-29
Scenario B. Use the information in the following paragraph to answer the following questions.
After reviewing the history of many successful entrepreneurial ventures, a few interesting
cases stand out. They are:
• Minute Clinic's health care kiosks in supermarkets.
• Visionics biometric software that can assist in identifying runaways, shoplifters, or
terrorists.
• Nanostring's molecular bar coding enterprise.
• The tourism industry at Mount Helens, a volcano in the United States that recently erupted.
94. All of the above businesses were started by entrepreneurs who were able to spot a(n):
A. adventure.
B. opportunity.
C. risk.
D. gamble.
E. benchmarking target.
95. Minute Clinic is an example of a business that was created as a result of:
A. technological discoveries.
B. demographic changes.
C. economic dislocations.
D. calamities.
E. government initiatives and rule changes.
6-30
96. The tourism industry at Mount Helens is an example of a business that was created as a
result of:
A. a technological discovery.
C. an economic dislocation.
D. a calamity.
Scenario C. Use the information given below to answer the questions below the paragraph.
Three entrepreneurs describe their ventures in the following manner:
Raymond: "I have invested very little money but I am the first to launch the product in the
market."
Sharon: "I have invested very little money in my business for a product with many similar
competitors already in the market."
Kevin: "I have spent an incredible amount of money getting my business going in an industry
with many well-established competitors."
97. According to the entrepreneurial strategy matrix, Raymond's scenario can be described as:
A. low innovation/high risk.
B. low innovation/low risk.
C. high innovation/low risk.
D. high innovation/high risk.
E. high innovation/no risk.
6-31
98. According to the entrepreneurial strategy matrix, Sharon's venture can be described as:
A. low innovation/no risk.
99. According to the entrepreneurial strategy matrix, Kevin’s venture can be described as:
C. high innovation/high risk.
D. high innovation/low risk.
6-32
Scenario D. Use the information provided to answer the questions that follow.
Ashton has begun the planning process for his entrepreneurial venture. He has completed an
assessment of his vision to operate a full-service shuttle service for the elderly, for which he
feels there is a strong market. He has a good understanding of the availability of his own
resources and his personal traits to manage the business. Now, he is prepared to start
compiling functional plans for marketing, finance, and human resources so that he can obtain
the financing he will need to start. He is also deciding how to develop the right reputation and
create the proper networks to find employees and customers as well as get advice from
fellow businesspeople.
100.Which formal stage of the planning process has Ashton completed?
A. An environmental analysis
B. A SWOT analysis
C. A promotional plan
D. An opportunity analysis
E. A business plan
101.If, after the current assessment, Ashton still believes in the potential of the venture, he
should now proceed with which step of the planning process?
B. A SWOT analysis
E. A business plan
6-33
102.When Ashton worries about his network and the reputation of his business, he is concerned
with:
A. social capital.
B. skunkworks.
C. horse trading.
D. bootlegging.
E. brainstorming.
6-34
Chapter 06 Entrepreneurship Answer Key
True / False Questions
1. An entrepreneur is not a manager but engages in additional activities that all managers
(p. 122) do.
FALSE
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-01 Describe why people become entrepreneurs and what it takes; personally.
Level of Difficulty: 2 Medium
Topic: Entrepreneurship
2. Entrepreneurs operate in a formal management hierarchy with well-defined authority and

(p. 122) responsibility.
FALSE
AACSB: Analytic
Blooms: Understand
6-35
3. Managers usually prefer to own assets, whereas entrepreneurs often rent or use assets on
(p. 122) a temporary basis.
TRUE
AACSB: Analytic
Blooms: Understand
4. A small business differs from an entrepreneurial venture.

(p. 122)
TRUE
AACSB: Analytic
Blooms: Understand
5. Managers are quicker to act and actively manage risk, while entrepreneurs often are
(p. 122) slower to act and tend to avoid risk.
FALSE
AACSB: Analytic
Blooms: Understand
6-36
6. A small business is often defined as having fewer than 100 employees, as well as being
(p. 122) independently owned and operated.
TRUE
AACSB: Analytic
Blooms: Remember
Level of Difficulty: 1 Easy
7. Laura independently owns and operates Kites Inc., a company with 45 employees. She
(p. 122) tends not to manage particularly aggressively and expects moderate sales, profits, and
growth. Laura's company is considered an entrepreneurial venture.
FALSE
AACSB: Reflective Thinking

Blooms: Apply
Level of Difficulty: 3 Hard
8. Corporate managers who create new independent businesses with the benefit of
(p. 123- corporate support are known as intrapreneurs.
124)
FALSE
AACSB: Analytic
Blooms: Remember
6-37
9. Entrepreneurs are essentially gamblers.
(p. 124)
FALSE
AACSB: Analytic
Blooms: Understand
10. Entrepreneurs experience stress, but they also have high job satisfaction.
(p. 124)
TRUE
AACSB: Analytic
Blooms: Understand
11. Entrepreneurs start their own firms because of the challenge, profit potential, and
(p. 125) enormous satisfaction they hope lies ahead.
TRUE
AACSB: Analytic
Blooms: Remember
6-38
12. Observers say that in contemplating one’s business, one must start with a great idea.
(p. 127)
TRUE
AACSB: Analytic
Blooms: Remember
13. Entrepreneurs spot, create, and exploit opportunities.

(p. 128)
TRUE
AACSB: Analytic
Blooms: Remember
Learning Objective: 06-02 Summarize how to assess opportunities to start new businesses.
Topic: What Business Should You Start?
14. Calamities such as wars and natural disasters can provide opportunities for
(p. 129) entrepreneurs.
TRUE
AACSB: Analytic
Blooms: Understand
6-39
15. A franchisor is an innovator who has created at least one successful store and seeks
(p. 130) partners to operate the same concept in other local markets.
TRUE
AACSB: Analytic
Blooms: Remember
16. In the transaction fee model, a website brings buyers and sellers together and charges a
(p. 132) commission for each sale.
FALSE
AACSB: Analytic
Blooms: Remember
17. Entrepreneurs are not tolerant of stress and find it difficult to resolve problems.
(p. 132)
FALSE
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-03 Identify common causes of success and failure.
Topic: What Does It Take, Personally?
6-40
18. In the context of the entrepreneurial strategy matrix, most small business ventures are in
(p. 133) the lower right quadrant where innovation is low and risk is high.
TRUE
AACSB: Analytic
Blooms: Understand
19. Start-ups have at least two major liabilities: newness and fast growth.
(p. 135)
FALSE
AACSB: Analytic
Blooms: Understand
20. Business incubators, often located in industrial parks or abandoned factories, are
(p. 135) protected environments for new, small businesses.
TRUE
AACSB: Analytic
Blooms: Remember
6-41
21. As the business grows, entrepreneurs often hesitate to delegate work they are used to
(p. 137) doing.
TRUE
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-04 Discuss common management challenges.
Topic: Common Management Challenges
22. A common entrepreneurial malady is an aversion to record keeping.

(p. 138)
TRUE
AACSB: Analytic
Blooms: Understand
23. A business plan describes only the basic idea involved in starting a new venture.
(p. 139)
FALSE
AACSB: Analytic
Blooms: Remember
Learning Objective: 06-05 Explain how to increase your chances of success; including good business planning.
Topic: Planning and Resources Help You Succeed
6-42
24. When a business goes wrong, nonprofessional investors are less helpful and less likely to
(p. 141) advance more money.
TRUE
AACSB: Analytic
Blooms: Understand
25. Social capital refers to being part of a social network and having a good reputation.
(p. 141)
TRUE
AACSB: Analytic
Blooms: Remember
26. Today's large corporations are passive bystanders in the entrepreneurial explosion.
(p. 142)
FALSE
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-06 Describe how managers of large companies can foster entrepreneurship.
Topic: Corporate Entrepreneurship
6-43
27. In the context of building intrapreneurship, skunkworks are project teams designated to
(p. 143) produce a new, innovative product.
TRUE
AACSB: Analytic
Blooms: Remember
28. Organizations that encourage intrapreneurship face the obvious risk of failure.
(p. 144)
TRUE
AACSB: Analytic
Blooms: Understand
29. The successful intrapreneurial organization avoids relying on its entrepreneurial spirit to
(p. 144) produce at least one winner from among several projects.
FALSE
AACSB: Analytic
Blooms: Understand
6-44
30. CEOs play a crucial role in promoting entrepreneurship within large corporations.
(p. 144)
TRUE
AACSB: Analytic
Blooms: Understand
31. The pursuit of lucrative opportunities by enterprising individuals under conditions of

(p. 121) uncertainty is known as:
A. entrepreneurship.
B. sugging.
C. bootlegging.
D. skunkworks.
E. incubation.
Entrepreneurship occurs when an enterprising individual pursues a lucrative opportunity

under conditions of uncertainty.
AACSB: Analytic
Blooms: Remember
6-45
32. The process by which enterprising individuals initiate, manage, and assume the risks and
(p. 122) rewards associated with a business is known as a(n):
A. start-up.
B. corporation.
C. governmental agency.
E. joint venture.
The process by which enterprising individuals initiate, manage, and assume the risks and
rewards associated with a business venture is known as an entrepreneurial venture.
AACSB: Analytic
Blooms: Remember
6-46
33. A business having fewer than 100 employees, independently owned and operated, not
(p. 122) dominant in its field, and not characterized by many innovative practices is a(n):
A. nonprofit organization.
B. small business.
C. greenfield venture.
E. incubator.
A small business has fewer than 100 employees, is independently owned and operated, is
not dominant in its field, and is not characterized by many innovative practices. Small
business owners tend not to manage particularly aggressively, and they expect normal,
moderate sales, profits, and growth.
AACSB: Analytic
Blooms: Remember
6-47
34. A(n) _____ is a new business having growth and high profitability as primary objectives.
(p. 123)
A. angel investment
B. junior enterprise
C. small enterprise
D. entrepreneurial venture
E. greenfield venture
An entrepreneurial venture has growth and high profitability as its primary objectives.
Entrepreneurs manage aggressively and develop innovative strategies, practices, and
products.
AACSB: Analytic
Blooms: Understand
6-48
35. While working at a software company, Ronald has created a new venture based solely on
(p. 123- his idea while using his company’s proprietary technology. Ronald can be described as
124)
a(n):
A. intrapreneur.
B. angel investor.
C. quasi partner.
D. venture capitalist.
E. social worker.
Intrapreneurs are new venture creators working inside big companies; they are corporate

Blooms: Apply
6-49
36. _____ are new venture creators working inside big companies; they are corporate
(p. 123- entrepreneurs, using their company’s resources to build a profitable line of business based
124)
A. Intrapreneurs
B. Entrepreneurs
C. Sole proprietors
D. Management novices
E. Licensees
Intrapreneurs are new venture creators working inside big companies; they are corporate
AACSB: Analytic
Blooms: Remember
6-50
37. Your roommate wants to start a business and everybody has been giving her various kinds
(p. 124) of advice about being an entrepreneur. Which of the following statements is true of
entrepreneurship?
A. Any entrepreneur with a good idea can raise venture capital.
B. Entrepreneurs are their own bosses and independent.
C. Entrepreneurs “get rich quick” and enjoy a lot of leisure time.
D. Entrepreneurs take careful, calculated risks and are not afraid to act on those
decisions.
E. If an entrepreneur is talented, he or she will quickly succeed.
Entrepreneurs take careful, calculated risks and are not afraid to act on those decisions.
AACSB: Analytic
Blooms: Remember
6-51
38. Eddie was a manager at a company that produced household appliances. He had many
(p. 125) innovative ideas to increase profit. However, his ideas were not received well by the
company. So, he left the company to pursue his own business. His new business is known
as a(n):
A. entrepreneurial venture.
B. spin-off.
C. corporate espionage.
D. skunkwork.
E. angel investment.
People start their own companies when they see their progress or ideas blocked at big
corporations. When people are laid off, believe they will not receive a promotion, or are
frustrated by bureaucracy or other features of corporate life, they may become
entrepreneurs.

Blooms: Apply
6-52
39. Laura recently started her own business. She has nearly recreated a company she worked
(p. 126) for previously. But, she has great business acumen and has been able to run her business
much more efficiently and profitably. Laura is a(n):
A. promoter.
B. entrepreneur.
C. manager.
D. intrapreneur.
E. inventor.
Successful entrepreneurs are innovators and also have good knowledge and skills in
management, business, and networking. In contrast, manager-administrators may be great
at ensuring efficient operations but aren’t necessarily innovators.

Blooms: Apply
6-53
40. When creating a new business one should start with:
(p. 127)
A. a viable market.
B. a product.
C. a great idea.
D. good timing.
E. meeting social responsibilities.
Many entrepreneurs and observers say that in contemplating your business, one must
start with a great idea.
AACSB: Analytic
Blooms: Understand
6-54
41. Laura, an enterprising individual, wants to open a store in her town. She wants her store to
(p. 130) be of the same type as a popular coffee chain that is successfully operating in a city
nearby. Laura wants to become a(n):
A. business incubator.
B. innovator.
C. angel investor.
D. franchisee.
E. intrapreneur.
A franchisee is a partner in an entrepreneurial alliance who manages a new store of the

same type in a new location according to the terms of the alliance with the franchisor.

Blooms: Apply
6-55
(p. 132) charging fees to direct Internet website visitors to other companies' websites.
A. transaction fee
C. intermediary
D. affiliate
E. subscription
In the affiliate model, sites pay commissions to other sites to drive business to their own
sites.
AACSB: Analytic
Blooms: Remember
6-56
(p. 132) charging monthly or annual fees for Internet website visits or access to website content.
A. transaction fee
C. intermediary
D. affiliate
E. subscription
In the subscription model, the website charges a monthly or annual fee for site visits or
access to site content.
AACSB: Analytic
Blooms: Remember
6-57
44. eBay brings buyers and sellers together and charges a commission for each sale. This type
(p. 132) of business model is known as a(n):
A. transaction fee model.
B. advertising support model.
C. intermediary model.
D. affiliate model.
E. subscription model.
In the Intermediary model, a website brings buyers and sellers together and charges a
commission for each sale. The premier example is eBay.
AACSB: Analytic
Blooms: Remember
6-58
45. The side street effect refers to:
(p. 132)
A. the appearance of unexpected opportunities as one follows a plan.
B. a corporate spin-off not sanctioned by the corporation.
C. using corporate resources to pursue entrepreneurial activities.
D. entrepreneurial ventures that are marginally successful but never experience

significant growth.
E. the lack of focus seen in many entrepreneurs.
As one heads down a road, unexpected opportunities begin to appear. This is known as
the side street effect.
AACSB: Analytic
Blooms: Remember
6-59
46. Entrepreneurs may be able to capitalize on _____ that refers to finding unexpected
(p. 132) opportunities after heading down a road, even if their original idea does not work.
A. the demographic changes
B. the side street effect
C. bootlegging
D. skunkworks
E. advertising support
Even if one’s original idea does not work, one may be able to capitalize on the side street
effect. As one heads down a road, one comes to unknown places, and unexpected
opportunities begin to appear, and, while one is looking, prepare so one can act quickly
and effectively on any opportunity that presents itself.
AACSB: Analytic
Blooms: Understand
6-60
47. Which of the following characteristics helps an entrepreneur succeed?
(p. 132)
A. Commitment to family welfare
B. Tolerance of risk, ambiguity, and uncertainty
C. Refusal to take risks
D. Maintaining status quo
E. Inability to resolve problems
One is more likely to succeed as an entrepreneur if one has certain characteristics,

including tolerance of risk, ambiguity, and uncertainty. Entrepreneurs are calculated risk
takers and risk managers, tolerant of stress, and able to resolve problems.
AACSB: Analytic
Blooms: Remember
6-61
48. Cambridge Counseling, an entrepreneurial venture, does not have any distinctive services
(p. 133) when compared with the well-established competitors in the field, and the business will
require a sizable investment. Which quadrant of the entrepreneurial strategy matrix will
the venture be placed?
A. High innovation/low risk
B. High innovation/high risk
C. Low innovation/low risk
D. Low innovation/high risk
E. Medium innovation/low risk
Most small business ventures are in the lower right, where innovation is low and risk is
high. They are fairly conventional entries in well-established fields. New restaurants, retail
shops, and commercial outfits involve a sizable investment by the entrepreneur and face
direct competition from similar businesses.

Blooms: Apply
6-62
49. Most small business ventures are located in (the) _____ quadrant(s) of the entrepreneurial
(p. 133) strategy matrix.
A. upper left
B. lower left
C. upper right
D. lower right
E. upper left and upper right
Most small business ventures are in the lower right in Exhibit 6.3, where innovation is low
and risk is high. They are fairly conventional entries in well-established fields. New
restaurants, retail shops, and commercial outfits involve a sizable investment by the
entrepreneur and face direct competition from similar businesses.
AACSB: Analytic
Blooms: Understand
6-63
50. In the context of the entrepreneurial strategy matrix, a novel product idea that involves a
(p. 133) large financial investment would be described as:
A. high innovation/low risk.
B. high innovation/high risk.
C. low innovation/low risk.
D. low innovation/high risk.
E. low innovation/no risk.
In the upper-right quadrant, novel product ideas (high innovation) are accompanied by
high risk because the financial investments and competition are great. A new drug or a
new automobile would likely fall into this category.
AACSB: Analytic
Blooms: Understand
6-64
51. In the context of the entrepreneurial strategy matrix, which of the following products is
(p. 133) most likely to have the highest risks and returns?
A. Velcro fasteners
B. Tax preparation service
C. New pharmaceutical drug
D. New restaurant
E. Lawn mowing service
In the upper-right quadrant, novel product ideas (high innovation) are accompanied by
high risk because the financial investments and competition are great. A new drug or a
new automobile would likely fall into this category. The possible risks and returns are
highest in the upper right quadrant.
AACSB: Analytic
Blooms: Understand
6-65
52. Which of the following is true of entrepreneurial ventures?
(p. 134)
A. Companies offering mundane products cannot hope to gain competitive advantage.
B. For start-ups, failure is an exception rather than the rule.
C. Successful companies do not always require a cutting-edge technology or an exciting

new product.
D. Acquiring venture capital is essential to the success of most start-up businesses.
E. The odds of survival of an entrepreneurial venture worsen if it grows to at least 10 or

20 people.
The entrepreneurial strategy matrix can help entrepreneurs remember a useful point:
successful companies do not always require a cutting-edge technology or an exciting new
product.
AACSB: Analytic
Blooms: Understand
6-66
53. Which of the following improves the odds of survival of a venture?
(p. 135)
A. Economic downturn
B. Newness
C. Smallness
D. Risky market
E. Revenues of $2–3 million
The odds of survival for a new venture improve if the venture grows to at least 10 or 20
people, has revenues of $2 million or $3 million, and is pursuing opportunities with growth
potential. Also, good economic times may make it easier to start a company and to survive.
AACSB: Analytic
Blooms: Understand
6-67
54. _____ are protected environments for new, small businesses offering low rents and shared
(p. 135) costs.
A. Skunkworks
B. Business incubators
C. Spinoffs
D. Bootleggings
E. Global start-ups
Business incubators, often located in industrial parks or abandoned factories, are

protected environments for new, small businesses.
AACSB: Analytic
Blooms: Remember
6-68
55. Which of the following is a benefit of business incubators?
(p. 135)
A. Free rent
B. High security
C. Provision of venture capital
D. Access to shared services
E. Guaranteed profitability
Incubators offer benefits such as low rents and shared costs. Shared staff costs, such as
for receptionists and secretaries, avoid the expense of a full-time employee but still
provide convenient access to services.
AACSB: Analytic
Blooms: Understand
6-69
56. In the context of common management challenges, leadership deteriorates into
(p. 137) micromanagement when entrepreneurs fail to:
A. train a successor.
B. monitor financial performance.
C. delegate work.
D. enjoy work.
E. plan for contingencies.
As the business grows, entrepreneurs often hesitate to delegate work they are used to
doing. Leadership deteriorates into micromanagement.
AACSB: Analytic
Blooms: Understand
6-70
57. The success of entrepreneurial venture is often jeopardized by the death of the founder.
(p. 138) Which of the following is an important measure to minimize this problem?
A. Conservative use of funds
B. Succession planning
C. Record keeping
D. Decreased delegation
E. Going public
One long-term measure of an entrepreneur’s success is the fate of the venture after the
founder’s death. Founding entrepreneurs often fail to plan for succession.
AACSB: Analytic
Blooms: Understand
6-71
58. _____ offer a way for a business to raise capital through federally registered and
(p. 138) underwritten sales of shares in the company.
A. Initial public stock offerings
B. Venture capital funds
C. Skunkworks
D. Bootleggings
E. Franchises
Initial public stock offerings (IPOs) offer a way to raise capital through federally registered
and underwritten sales of shares in the company.
AACSB: Analytic
Blooms: Remember
6-72
59. In order for family-managed businesses to survive and prosper, management guru Peter
(p. 138) Drucker advised them to:
A. grow as aggressively as possible.
B. discontinue hiring family members.
C. fill at least one key position with a nonfamily member.
D. offer initial public stock offerings as soon as possible.
E. tolerate mediocre performance by family members.
Management guru Peter Drucker offered the advice to help family-managed businesses
survive and prosper: family members working in the business must be at least as capable
and hard-working as other employees; at least one key position should be filled by a
nonfamily member; someone outside the family and the business should help plan
succession.
AACSB: Analytic
Blooms: Understand
6-73
60. According to Peter Drucker, which of the following is true with respect to managing a
(p. 138) family business?
A. Mediocre performance by family members employed in the company may be tolerated.
B. The business should be aggressively managed.
C. The business should not hire family members, despite good qualifications.
D. Someone outside the family and the business should help plan succession.
E. The business should “go public” as soon as possible.
Management guru Peter Drucker offered the advice to help family-managed businesses
survive and prosper: family members working in the business must be at least as capable
and hard-working as other employees; at least one key position should be filled by a
nonfamily member; someone outside the family and the business should help plan
succession.
AACSB: Analytic
Blooms: Understand
6-74
61. Entrepreneurs, in part because they are very busy, often fail to use _____, resulting in
(p. 138) inadequate margins to support growth.
A. formal control systems
B. a forward-thinking orientation
D. venture capital
E. total quality management systems
Entrepreneurs, in part because they are very busy, often fail to use formal control systems.
AACSB: Analytic
Blooms: Understand
62. In the context of starting an entrepreneurial venture, the first formal step is:
(p. 139)
A. secure the finances.
B. writing a business plan.
C. conducting an opportunity analysis.
D. getting others to support your ideas.
E. hiring the right people.
The first formal planning step is to do an opportunity analysis.
AACSB: Analytic
Blooms: Understand
6-75
63. A description of the good or service, an assessment of the opportunity, an assessment of
(p. 139) the entrepreneur, specification of activities and resources needed to translate the idea
into a viable business, and the source(s) of capital together make up a(n):
A. business plan.
B. control system.
C. opportunity analysis.
D. business audit.
E. organization chart.
The first formal planning step is to do an opportunity analysis. This analysis includes a
description of the good or service, an assessment of the opportunity, an assessment of the
entrepreneur, a specification of activities and resources needed to translate your idea into
a viable business, and your source(s) of capital.
AACSB: Analytic
Blooms: Remember
6-76
64. Which of the following is the purpose of an opportunity analysis?
(p. 139)
A. To obtain financing
B. To negotiate agreements with suppliers
C. To excite potential customers
D. To specify resources needed to translate the idea into a viable business
E. To work out the details of marketing, finance, and manufacturing
The first formal planning step is to do an opportunity analysis. This analysis includes a
description of the good or service, an assessment of the opportunity, an assessment of the
entrepreneur, a specification of activities and resources needed to translate your idea into
a viable business, and your source(s) of capital.
AACSB: Analytic
Blooms: Understand
6-77
65. A(n) _____ describes all the elements involved in starting a new venture.
(p. 139)
A. business plan
B. control system
D. initial public stock offering
E. organization chart
A business plan describes all the elements involved in starting a new venture.
AACSB: Analytic
Blooms: Remember
66. Which of the following is a function of business plan?

(p. 139)
A. To serve as filters to separate unimportant matters from important ones
B. To raise capital through federally registered shares of the company
C. To contribute to the upliftment of company standards
D. To ensure the success of the business
E. To create a long-term relationship with an investment banking firm
The business plan (1) helps determine the viability of one’s enterprise, (2) guides one as
one plans and organizes, and (3) helps one obtain financing.
AACSB: Analytic
Blooms: Understand
6-78
67. Which of the following devotes too much attention to financial projections while neglecting
(p. 139) other important information that is important to investors?
A. Business audit
B. Accounting analysis
C. Business plan
D. Opportunity analysis
E. Business incubator
Most business plans devote so much attention to financial projections that they neglect
other important information that matters greatly to astute investors. In addition to the
numbers, the best plans convey, and make certain that the entrepreneurs have carefully
thought through, five key factors: the people, the opportunity, the competition, the context
and the risk and reward.
AACSB: Analytic
Blooms: Understand
6-79
68. Which of the following key planning elements involves a competitive advantage that can
(p. 140) be defended and should be focused on customer?
A. Opportunity
B. Risk and reward
C. People
D. Competition
E. Context
In addition to the numbers, the best plans convey, and make certain that the
entrepreneurs have carefully thought through, five key factors, one of which is the
opportunity. Here, one needs a competitive advantage that can be defended. The focus
should be on customers.
AACSB: Analytic
Blooms: Understand
6-80
69. People’s judgment of a company’s acceptance, appropriateness, and desirability, generally
(p. 141) stemming from company goals and methods that are consistent with societal values is
known as:
A. social capital.
B. bootlegging.
C. legitimacy.
D. skunkworks.
People’s judgment of a company’s acceptance, appropriateness, and desirability, generally

stemming from company goals and methods that are consistent with societal values is
known as legitimacy.
AACSB: Analytic
Blooms: Remember
6-81
70. A competitive advantage from relationships with other people and the image other people
(p. 141) have of the entrepreneur is known as:
A. social capital.
B. bootlegging.
C. legitimacy.
D. skunkworks.
Social capital is a competitive advantage from relationships with other people and the
image other people have of an entrepreneur.
AACSB: Analytic
Blooms: Remember
6-82
71. As an organization grows, the successful entrepreneur will:
(p. 141)
A. retain control over all research operations.
B. run the company single-handedly.
C. make all major decisions.
D. develop an effective top management team.
E. apply only his personal theories to business.
Crucial to the success of a new business are nonfinancial resources, including the top
management team.
AACSB: Analytic
Blooms: Understand
6-83
72. The first step toward building organizational support for an idea that involves explaining
(p. 143) the idea and seeking approval to look for wider support is known as:
B. bootlegging.
C. horse trading.
If one needs to build support for a project idea, the first step involves clearing the
investment with one’s immediate boss or bosses. At this stage, one explains the idea and
seeks approval to look for wider support.
AACSB: Analytic
Blooms: Understand
6-84
73. Guaranteeing the project's technical and political feasibility, often with a formal
(p. 143) presentation to higher management, refers to which of the following stages for building
support for an idea?
B. Bootlegging
C. Horse trading
As the last step in building support for a project idea, one should get the blessing of
relevant higher-level officials. This usually involves a formal presentation. One will need to
guarantee the project’s technical and political feasibility.
AACSB: Analytic
Blooms: Understand
6-85
74. "Loading the gun", or lining up ammunition in support of one’s idea, is a phrase used by
(p. 143) managers at General Electric that parallels which stage of building support for an idea?
B. Bootlegging
C. Horse trading
Executives often want evidence that the project is backed by your peers before committing
to it. This involves making cheerleaders—people who will support the manager before
formal approval from higher levels. Managers at GE refer to this strategy as “loading the
gun”—lining up ammunition in support of your idea.
AACSB: Analytic
Blooms: Remember
6-86
75. Amanda, a manager, decides to offer her support to Jason, one of her subordinates, on a
(p. 143) new project in exchange for a share of the payoffs. In the context of entrepreneurship, this
practice is known as:
B. bootlegging.
C. horse trading.
One step in building support for a project idea is horse trading. One can offer promises of
payoffs from the project in return for support, time, money, and other resources that peers
and others contribute.

Blooms: Apply
6-87
76. Orlando works as a technician for a large manufacturer of biomedical equipment. Orlando
(p. 143) has discovered a way to produce disposable products in large quantities that will be useful
in research facilities. His employer has given Orlando and a selected team of researchers
the resources to develop this idea. This project is referred to as:
A. a spin-off.
B. a skunkwork.
C. bootlegging.
D. horse trading.
E. sponsorship.
Skunkworks are project teams designated to produce a new product.

Blooms: Apply
6-88
77. Informal efforts, as opposed to official job assignments, in which employees work to
(p. 143) create new products and processes of their own choosing and initiative are known as:
A. spin-offs.
B. skunkworks.
C. bootlegging.
D. horse trading.
E. sponsorship.
Bootlegging refers to informal efforts—as opposed to official job assignments— in which

employees work to create new products and processes of their own choosing and
initiative.
AACSB: Analytic
Blooms: Remember
6-89
78. Miguel works as a technician for a large manufacturer of biomedical equipment. He has
(p. 143) discovered a technique to produce composite materials more efficiently. The company
encourages its employees to pursue new ideas on company premises. Which of the
following does Miguel’s company support?
A. Bootlegging
B. Skunkworks
C. Spin-offs
D. Delegation
E. Corporate espionage
Bootlegging refers to informal efforts, as opposed to official job assignments, in which

employees work to create new products and processes of their own choosing and
initiative.

Blooms: Apply
6-90
79. Successfully fostering and managing intrapreneurship involves:
(p. 144)
A. discouraging bootlegging activities.
B. focusing on one very large, innovative project.
C. rewarding risk taking.
D. spreading intrapreneurial efforts over many small scale projects.
E. minimizing aggressiveness with competitors.
Companies should tolerate some bootlegging, and some even encourage it. The most
dangerous risk in intrapreneurship is the risk of over relying on a single project. Many
companies fail while awaiting the completion of one large, innovative project.
Organizations also court failure when they spread their entrepreneurial efforts over too
many projects. If there are many projects, each effort may be too small in scale. A firm
that is entrepreneurial tends to challenge competitors directly and intensely. On the other
hand, skunkworks are effective in part because the risk takers have the opportunity to
earn large rewards.
AACSB: Analytic
Blooms: Understand
6-91
80. The most dangerous risk in intrapreneurship is that of:
(p. 144)
A. spreading intrapreneurial efforts over too many projects.
B. over relying on a single large project.
C. working on too many underfunded projects.
D. limiting one’s personal energy to certain tasks.
E. engaging in prospects that are too risky.
The most dangerous risk in intrapreneurship is the risk of over relying on a single project.
Many companies fail while awaiting the completion of one large, innovative project.
AACSB: Analytic
Blooms: Understand
6-92
81. The tendency of an organization to engage in activities designed to identify and capitalize
(p. 144) successfully on opportunities to launch new ventures by entering new or established
markets with new or existing goods or services is known as:
A. entrepreneurial orientation.
B. oligopolistic behavior.
C. cartelism.
D. bid rigging.
E. spinning off.
Entrepreneurial orientation is the tendency of an organization to engage in activities

designed to identify and capitalize successfully on opportunities to launch new ventures
by entering new or established markets with new or existing goods or services.
AACSB: Analytic
Blooms: Remember
Essay Questions
6-93
82. Distinguish between a small business and an entrepreneurial venture.
(p. 122-
123)
AACSB: Analytic
Blooms: Understand
83. What are some of the reasons why people become entrepreneurs?
(p. 125)
AACSB: Analytic
Blooms: Understand
84. Describe the differences between entrepreneurs, inventors, promoters, and managers.
(p. 126)
AACSB: Analytic
Blooms: Understand
6-94
85. In the context of the opportunity for starting a business, what are some of the possibilities
(p. 129) that entrepreneurs can exploit?
AACSB: Analytic
Blooms: Understand
86. What are the five business models that have proven successful for e-commerce?
(p. 132)
AACSB: Analytic
Blooms: Understand
87. Describe some of the characteristics that make a person more likely to succeed as an
entrepreneur.
AACSB: Analytic
Blooms: Understand
6-95
88. In the context of the entrepreneurial strategy matrix, describe the four kinds of new
(p. 133) ventures.
AACSB: Analytic
Blooms: Understand
89. Describe some of the major management challenges associated with entrepreneurship.
(p. 136-
137)
AACSB: Analytic
Blooms: Understand
90. Describe the five key planning elements used in developing the best business plans.
(p. 139-
141)
AACSB: Analytic
Blooms: Understand
6-96
91. Describe the five tendencies that determine entrepreneurial orientation.
(p. 144-
145)
AACSB: Analytic
Blooms: Understand
6-97
Scenario A. Use the information in the following paragraph to answer the following
questions.
Your roommate comes in after class to tell you, with great excitement, that she has
decided to become an entrepreneur. Her reasons are these: First, she is something of a
gambler, so she believes entrepreneurship is a perfect match for her personality. Second,
she is an admitted "control freak". She is confident that all it takes is a good idea and that
money will surely follow. Finally, she made 650 on her SATs so her success, she feels, is a
certainty.
92. Your roommate has accurately described some of the _____ of/about entrepreneurship.
(p. 123-
124)
A. challenges
B. opportunities
C. realities
D. myths
E. facts
Entrepreneurship is not simple, and it is frequently misunderstood. Entrepreneurs are not

gamblers. They take careful, calculated risks and are not afraid to act on those decisions.

Blooms: Apply
6-98
93. In the context of the given scenario, which of the following is true?
(p. 123-
124)
A. She may not be successful if she starts an entrepreneurial venture based on myths.
B. She will be successful because she accurately understands the role of entrepreneurs.
C. She will never be successful.
D. She will be successful because she is smart and talented.
E. There is no way to assess her chances of success.
Entrepreneurship is not simple, and it is frequently misunderstood. Exhibit 6.1 describes

12 myths and realities regarding entrepreneurship.

Blooms: Apply
6-99
Scenario B. Use the information in the following paragraph to answer the following
questions.
After reviewing the history of many successful entrepreneurial ventures, a few interesting
cases stand out. They are:
• Minute Clinic's health care kiosks in supermarkets.
• Visionics biometric software that can assist in identifying runaways, shoplifters, or
terrorists.
• Nanostring's molecular bar coding enterprise.
• The tourism industry at Mount Helens, a volcano in the United States that recently
erupted.
94. All of the above businesses were started by entrepreneurs who were able to spot a(n):
(p. 128)
A. adventure.
B. opportunity.
C. risk.
D. gamble.
E. benchmarking target.
Entrepreneurs spot, create, and exploit opportunities in a variety of ways. Entrepreneurial

companies can explore domains that big companies avoid and introduce goods or services
that capture the market because they are simpler, cheaper, more accessible, or more
convenient.
AACSB: Analytic
Blooms: Understand
6-100
95. Minute Clinic is an example of a business that was created as a result of:
(p. 129)
A. technological discoveries.
C. economic dislocations.
D. calamities.
As the population ages, many organizations have sprung up to serve the older
demographic, from specially designed tablet and smartphone apps for seniors to assisted-
living facilities.

Blooms: Apply
6-101
96. The tourism industry at Mount Helens is an example of a business that was created as a
(p. 129) result of:
A. a technological discovery.
C. an economic dislocation.
D. a calamity.
Examples of calamities include the wars and natural disasters. A variety of business
opportunities such as emergency preparedness products are available due to this change.

Blooms: Apply
6-102
Scenario C. Use the information given below to answer the questions below the paragraph.
Three entrepreneurs describe their ventures in the following manner:
Raymond: "I have invested very little money but I am the first to launch the product in the
market."
Sharon: "I have invested very little money in my business for a product with many similar
competitors already in the market."
Kevin: "I have spent an incredible amount of money getting my business going in an
industry with many well-established competitors."
97. According to the entrepreneurial strategy matrix, Raymond's scenario can be described
(p. 133) as:
In the upper left quadrant of the matrix, innovation is high (ventures are truly novel ideas),
and there is little risk. A pioneering product might fit here if there are no current
competitors and new product investments are relatively small.

Blooms: Apply
6-103
98. According to the entrepreneurial strategy matrix, Sharon's venture can be described as:
(p. 133)
A. low innovation/no risk.
The low-innovation/low-risk category includes conventional ventures that require minimal

investment such as service businesses having low start-up costs.

Blooms: Apply
6-104
99. According to the entrepreneurial strategy matrix, Kevin’s venture can be described as:
(p. 133)
C. high innovation/high risk.
D. high innovation/low risk.
Most small business ventures are in the lower right, where innovation is low and risk is
high. They are fairly conventional entries in well-established fields. New restaurants, retail
shops, and commercial outfits involve a sizable investment by the entrepreneur and face
direct competition from similar businesses.

Blooms: Apply
6-105
Scenario D. Use the information provided to answer the questions that follow.
Ashton has begun the planning process for his entrepreneurial venture. He has completed
an assessment of his vision to operate a full-service shuttle service for the elderly, for
which he feels there is a strong market. He has a good understanding of the availability of
his own resources and his personal traits to manage the business. Now, he is prepared to
start compiling functional plans for marketing, finance, and human resources so that he
can obtain the financing he will need to start. He is also deciding how to develop the right
reputation and create the proper networks to find employees and customers as well as get
advice from fellow businesspeople.
100. Which formal stage of the planning process has Ashton completed?
(p. 139)
B. A SWOT analysis
E. A business plan
An opportunity analysis includes a description of the good or service, an assessment of

the opportunity, an assessment of the entrepreneur, a specification of activities and
resources needed to translate your idea into a viable business, and your source(s) of
capital.

Blooms: Apply
6-106
101. If, after the current assessment, Ashton still believes in the potential of the venture, he
(p. 139) should now proceed with which step of the planning process?
B. A SWOT analysis
E. A business plan
The business plan describes the venture and its market, strategies, and future directions.
It often has functional plans for marketing, finance, manufacturing, and human resources.
Blooms: Apply
6-107
102. When Ashton worries about his network and the reputation of his business, he is
(p. 139) concerned with:
A. social capital.
B. skunkworks.
C. horse trading.
D. bootlegging.
E. brainstorming.
Social capital is a competitive advantage from relationships with other people and the
image other people have of an entrepreneur.

Blooms: Apply
6-108

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True / False Questions

2. Entrepreneurs operate in a formal management hierarchy with well-defined authority and

4. A small business differs from an entrepreneurial venture.

9. Entrepreneurs are essentially gamblers.

13. Entrepreneurs spot, create, and exploit opportunities.

Multiple Choice Questions

31. The pursuit of lucrative opportunities by enterprising individuals under conditions of

A. Any entrepreneur with a good idea can raise venture capital.

B. Entrepreneurs are their own bosses and independent.

C. Entrepreneurs “get rich quick” and enjoy a lot of leisure time.

E. If an entrepreneur is talented, he or she will quickly succeed.

40. When creating a new business one should start with:

E. meeting social responsibilities.

A. transaction fee model.

B. advertising support model.

45. The side street effect refers to:

A. the appearance of unexpected opportunities as one follows a plan.

B. a corporate spin-off not sanctioned by the corporation.

C. using corporate resources to pursue entrepreneurial activities.

E. the lack of focus seen in many entrepreneurs.

A. the demographic changes

B. the side street effect

A. Commitment to family welfare

B. Tolerance of risk, ambiguity, and uncertainty

C. Refusal to take risks

D. Maintaining status quo

E. Inability to resolve problems

A. High innovation/low risk

B. High innovation/high risk

C. Low innovation/low risk

D. Low innovation/high risk

E. Medium innovation/low risk

E. upper left and upper right

A. high innovation/low risk.

B. high innovation/high risk.

C. low innovation/low risk.

D. low innovation/high risk.

E. low innovation/no risk.

B. Tax preparation service

C. New pharmaceutical drug

E. Lawn mowing service

52. Which of the following is true of entrepreneurial ventures?

A. Companies offering mundane products cannot hope to gain competitive advantage.

B. For start-ups, failure is an exception rather than the rule.

C. Successful companies do not always require a cutting-edge technology or an exciting new

D. Acquiring venture capital is essential to the success of most start-up businesses.

E. The odds of survival of an entrepreneurial venture worsen if it grows to at least 10 or 20

E. Revenues of $2–3 million

55. Which of the following is a benefit of business incubators?

C. Provision of venture capital

D. Access to shared services

B. monitor financial performance.

E. plan for contingencies.

A. Conservative use of funds

A. Initial public stock offerings

B. Venture capital funds

A. grow as aggressively as possible.

B. discontinue hiring family members.

C. fill at least one key position with a nonfamily member.