Chapter 1 Introduction to Entrepreneurship
1) GiftZip, the company profiled in the opening feature for Chapter 1, makes money via:
A) payments from companies that offer gift cards for displaying their cards on the site
B) the direct sale of gift cards displayed on its site
C) monthly subscription fees
D) online advertising
E) earning an affiliate fee for gift card purchases that originate from its site
Answer: E
Rationale:
GiftZip earns money by receiving affiliate fees for gift card purchases made through its site. This
means that when a user buys a gift card through GiftZip, the company receives a commission or
fee from the retailer offering the gift card. This model allows GiftZip to monetize its platform
without directly selling gift cards or charging subscription fees.
2) Which of the following was not a contributing factor to GiftZip's early success?
A) It was becoming increasingly affordable to launch an online business.
B) positive PR
C) angel investor funding
D) People were becoming increasingly comfortable buying online.
E) The gift card market was growing.
Answer: C
Rationale:
Angel investor funding was not specifically mentioned as a contributing factor to GiftZip's early
success in the question stem. The other factors—affordable online business launches, positive
PR, increasing comfort with online shopping, and a growing gift card market—were all
mentioned as contributors to GiftZip's early success.
3) According to the Global Entrepreneurship Monitor (GEM) 2010 survey, about ________ of
adults in the United States are either starting a business or are running a business that has been in
existence for less than 3 1/2 years.
A) 3.8 percent
B) 5.5 percent
C) 7.6 percent
D) 9.0 percent
E) 12.5 percent
Answer: C
Rationale:
The GEM 2010 survey found that 7.6 percent of adults in the United States were either starting a
business or running a business that had been in existence for less than 3 1/2 years. This indicates
a significant level of entrepreneurial activity in the U.S. during that time period.
4) According to the Global Entrepreneurship Monitor (GEM) 2007 study, the majority of people
in high-income countries are drawn to entrepreneurship:
A) to take advantage of an attractive opportunity
B) due to lack of career prospects
C) as a result of government incentives
D) because an important role model was an entrepreneur
E) to gain prestige
Answer: A
Rationale:
The GEM 2007 study found that the majority of people in high-income countries were drawn to
entrepreneurship to take advantage of an attractive opportunity. This suggests that many
entrepreneurs are motivated by the potential for success and growth in their ventures.
5) Which of the following statements regarding business success (or failure) rates is correct?
A) After four years, 15 percent of new businesses are still open.
B) After four years, 25 percent of new businesses are still open.
C) After four years, 50 percent of new businesses are still open.
D) Two out of three businesses fail within the first four years.
E) Nine out of ten businesses fail within the first four years.
Answer: C
Rationale:
The correct statement regarding business success rates is that after four years, 50 percent of new
businesses are still open. This statistic highlights the challenges that many new businesses face in
maintaining their operations beyond the initial startup phase.
6) Apple Inc. is a firm that is proactive, innovative and risk-taking. From this description, we can
most accurately conclude that Apple has a high level of:
A) enterprise focus
B) innovative intensity
C) entrepreneurial intensity
D) creative intensity
E) innovative concentration
Answer: C
Rationale:
The description of Apple Inc. as proactive, innovative, and risk-taking aligns with the concept of
entrepreneurial intensity. This refers to the degree to which a firm engages in entrepreneurial
behavior, such as innovation, risk-taking, and proactive decision-making.
7) Sarah Thorton is the founder of a company named Extreme Sports Apparel. The company
makes apparel products for extreme sports enthusiasts such as rock climbers, triathletes,
parasailors, and BMX bikers. Sarah wants her company to pursue a high level of corporate
entrepreneurship. To achieve that goal, Sarah's firm should be:
A) innovative, risk averse, and take a "wait and see" posture
B) taking a "wait and see" posture, innovative, and risk-taking
C) proactive, not innovative, and risk-taking
D) taking a "wait and see" posture, not innovative, and risk-averse
E) proactive, innovative, and risk-taking
Answer: E
Rationale:
To achieve a high level of corporate entrepreneurship, Sarah's firm should be proactive,
innovative, and risk-taking. These characteristics are key to fostering a culture of
entrepreneurship within an organization and driving innovation and growth.
8) Netflix is an established firm that encourages and emphasizes entrepreneurial behavior
throughout its various divisions. According to the textbook, Netflix practices:
A) tactical entrepreneurship
B) corporate entrepreneurship
C) strategic entrepreneurship
D) business entrepreneurship
E) enterprise entrepreneurship
Answer: B
Rationale:
Netflix practices corporate entrepreneurship, which involves encouraging entrepreneurial
behavior within an established firm. This approach allows Netflix to innovate and adapt to
changing market conditions while leveraging its existing resources and capabilities.
9) The three primary reasons that people become entrepreneurs and start their own firms are to:
A) gain prestige, realize financial rewards, and eliminate risk in their lives
B) do what they were "born" to do, be their own boss, and gain prestige
C) take big risks, be their own boss, and do what they were "born" to do
D) be their own boss, pursue their own ideas, and realize financial rewards
E) take advantage of government subsidies, pursue their own ideas, and realize financial rewards
Answer: D
Rationale:
The three primary reasons that people become entrepreneurs and start their own firms are to be
their own boss, pursue their own ideas, and realize financial rewards. These motivations reflect a
desire for autonomy, creativity, and financial independence.
10) According to the textbook, the number one reason that people become entrepreneurs is to:
A) realize financial rewards
B) gain prestige
C) be their own boss
D) continue a family tradition
E) pursue their own ideas
Answer: C
Rationale:
According to the textbook, the number one reason that people become entrepreneurs is to be their
own boss. This motivation reflects a desire for autonomy and control over one's professional life.
11) James Quinn is starting a firm in the financial services industry primarily to pursue financial
rewards. According to the textbook, starting a business to make a lot of money:
A) often fails to live up to its hype
B) is equally as satisfying as other reasons for starting a business
C) is the number one reason people start their own business
D) is the number two reason that people start their own business, right behind the lack of better
career prospects
E) does not rank among the top three reasons that people start their own business
Answer: A
Rationale:
The correct answer is A. While financial rewards can be a motivator for many entrepreneurs,
starting a business solely for the purpose of making a lot of money often fails to live up to its
hype. Entrepreneurship involves significant challenges and risks, and success is not guaranteed
by financial motivation alone.
12) According to the textbook, the four characteristics of successful entrepreneurs are:
A) passion for the business, on the cutting edge of technological change, very charismatic, and
tenacity despite failure
B) young and energetic, passion for the business, product/customer focus, and seeks recognition
C) passion for the business, tenacity despite failure, product/customer focus, and execution
intelligence
D) on the cutting edge of technological change, forward thinking, tenacity despite failure, and
product/customer focus
E) passion for the business, seeks recognition, young and energetic, and execution intelligence
Answer: C
Rationale:
The correct answer is C. According to the textbook, the four characteristics of successful
entrepreneurs are passion for the business, tenacity despite failure, product/customer focus, and
execution intelligence. These traits are often associated with successful entrepreneurial ventures.
13) The number one characteristic shared by successful entrepreneurs is:
A) a desire to achieve financial rewards
B) passion for the business
C) a desire to employ other people
D) a desire to fulfill a lifetime dream
E) a desire to bring a revolutionary new product or service to market
Answer: B
Rationale:
The correct answer is B. According to the textbook, the number one characteristic shared by
successful entrepreneurs is passion for the business. This passion drives entrepreneurs to
overcome challenges and pursue their goals with determination.
14) Which of the following was not identified in the textbook as one of the five primary reasons
passion is important for the launch of a successful entrepreneurial organization?
A) the ability to stick to a plan even when faced with evidence that changes are needed
B) a willingness to work hard for an extended period of time
C) ability to overcome setbacks and "no's"
D) the ability to listen to feedback on the limitations of your organization and yourself
E) perseverance and persistence when the going gets tough
Answer: A
Rationale:
The correct answer is A. The ability to stick to a plan even when faced with evidence that
changes are needed is not one of the five primary reasons passion is important for the launch of a
successful entrepreneurial organization, as identified in the textbook. The other options—
willingness to work hard, ability to overcome setbacks, ability to listen to feedback, and
perseverance—are all key aspects of why passion is important for entrepreneurship.
15) Stacey Wills, who is at heart a craftsperson, recently started a firm to manufacturer a new
innovative food blender. Stacey's desire is to sell her food blender to as many people as possible,
because she firmly believes in the merits of her product. Stacey's story best illustrates which of
the following characteristics, or attributes, of a successful entrepreneur?
A) product/customer focus
B) execution intelligence
C) tenacity despite failure
D) a desire to please consumers
E) a desire to gain financial rewards
Answer: A
Rationale:
The correct answer is A. Stacey Wills' story best illustrates the characteristic of product/customer
focus. She is focused on creating and selling a product that she believes in and that meets the
needs of her target market.
16) The What Went Wrong? feature in Chapter 1 focuses on YouCaster, a company that was
launched in 2006 but eventually went out of business. According to the feature, YouCaster failed
for two primary reasons:
A) a poorly equipped team of entrepreneurs and a lack of passion
B) too few customers and a lack of intellectual property protection
C) a lack of resolve and poor execution intelligence
D) a lack of execution intelligence and a poor product/customer focus
E) a lack of passion and too few customers
Answer: E
Rationale:
The correct answer is E. According to the feature, YouCaster failed due to a lack of passion and
too few customers. These factors contributed to the company's inability to sustain its business
operations.
17) Chad and Allison Druxman launched a firm several years ago and have been particularly
successful in introducing new products to the marketplace. One thing that Chad and Allison are
particularly good at is translating their thoughts, creativity, and imaginations into products that
reach the marketplace. The ability to make this happen is most closely related to which of the
following characteristics of successful entrepreneurs?
A) passion for the business
B) execution intelligence
C) tenacity despite failure
D) product/market focus
E) a desire for recognition
Answer: B
Rationale:
The correct answer is B. The ability to translate thoughts, creativity, and imaginations into
products that reach the marketplace is closely related to execution intelligence. This
characteristic involves the ability to effectively implement ideas and bring them to fruition.
18) The Savvy Entrepreneurial Firm feature in Chapter 1 focuses on Revio Mobile (maker of
Angry Birds) and Zeo, two companies that have produced successful products. The feature's
main purpose is to illustrate the importance of ________ as a key characteristic of the founders
of entrepreneurial firms.
A) execution intelligence
B) a desire to pursue financial rewards
C) tenacity despite failure
D) passion for the business
E) product/customer focus
Answer: C
Rationale:
The correct answer is C. The main purpose of the feature is to illustrate the importance of
tenacity despite failure as a key characteristic of the founders of entrepreneurial firms. This
characteristic reflects the perseverance and resilience needed to overcome challenges and
achieve success.
19) Which of the following is not one of the five common myths about entrepreneurs?
A) Entrepreneurs are tenacious.
B) Entrepreneurs are moderate risk takers.
C) Entrepreneurs should be young and energetic.
D) Entrepreneurs love the spotlight.
E) Entrepreneurs are born not made.
Answer: A
Rationale:
The correct answer is A. The statement "Entrepreneurs are tenacious" is not one of the five
common myths about entrepreneurs. The other options—moderate risk takers, should be young
and energetic, love the spotlight, and are born not made—are all common misconceptions about
entrepreneurship.
20) Which of the following was not identified in the textbook as one of the common traits and
characteristics of entrepreneurs?
A) has a strong work ethic
B) intolerant of ambiguity
C) visionary
D) promoter
E) decisive
Answer: B
Rationale:
The correct answer is B. Being intolerant of ambiguity was not identified in the textbook as one
of the common traits and characteristics of entrepreneurs. The other options—strong work ethic,
visionary, promoter, and decisive—are all commonly associated with successful entrepreneurs.
21) According to the textbook, entrepreneurs are:
A) gamblers
B) moderate risk takers
C) aggressive risk takers
D) forceful risk takers
E) minimal risk takers
Answer: B
Rationale:
The correct answer is B. According to the textbook, entrepreneurs are typically moderate risk
takers. While they are willing to take risks, they do so in a calculated manner, weighing the
potential rewards against the risks involved.
22) Suppose you are a Small Business Development Center counselor and you're looking at the
personality profiles of five potential entrepreneurs. Based on the profiles, which individual has
the most desirable mix of personal characteristics to become a successful entrepreneur?
A) Candidate A: visionary, energetic, moderate risk taker
B) Candidate B: seeks recognition, self-starter, creative
C) Candidate C: visionary, high risk taker, energetic
D) Candidate D: high risk taker, achievement-motivated, networker
E) Candidate E: tolerant for ambiguity, seeks recognition, motivated primarily by money
Answer: A
Rationale:
The correct answer is A. Candidate A has a mix of characteristics that are often associated with
successful entrepreneurs, including being visionary, energetic, and a moderate risk taker.
23) Which of the following is not a personality trait or characteristic common among
entrepreneurs?
A) promoter
B) visionary
C) short attention span
D) alert to opportunities
E) self-starter
Answer: C
Rationale:
The correct answer is C. Short attention span is not a common personality trait or characteristic
among entrepreneurs. The other options—promoter, visionary, alert to opportunities, and selfstarter—are commonly associated with successful entrepreneurs.
24) Which of the following statement is correct regarding entrepreneurial activity and age
ranges?
A) The highest percentage of entrepreneurs falls in the 19 years old and younger age range.
B) The highest percentage of entrepreneurs falls in the 20 to 34 age range.
C) The highest percentage of entrepreneurs falls in the 35 to 44 age range.
D) The highest percentage of entrepreneurs falls in the 45 to 54 age range.
E) The highest percentage of entrepreneurs falls in the 55+ age range.
Answer: B
Rationale:
The correct answer is B. According to the statement, the highest percentage of entrepreneurs falls
in the 20 to 34 age range, indicating that younger individuals are more likely to engage in
entrepreneurial activity.
25) According to the textbook, the biggest jump in entrepreneurial activity, by age range, from
1996 to 2010 is among entrepreneurs in the:
A) 19 years old and younger age range
B) 20 to 34 age range
C) 35 to 44 age range
D) 45 to 54 age range
E) 55 to 64 age range
Answer: E
Rationale:
The correct answer is E. According to the textbook, the biggest jump in entrepreneurial activity
from 1996 to 2010 was among entrepreneurs in the 55 to 64 age range. This suggests that older
individuals are increasingly engaging in entrepreneurial activities.
26) According to Chapter 1, investors often cite the ________ as their most important criterion in
the decision to fund new ventures.
A) financial position of the new venture
B) strength of the industry the new firm is entering
C) strength of the new venture's marketing plan
D) strength of the business idea
E) strength of the entrepreneur
Answer: E
Rationale:
The correct answer is E. According to Chapter 1, investors often cite the strength of the
entrepreneur as their most important criterion in the decision to fund new ventures. This
highlights the importance of the entrepreneur's qualities and characteristics in attracting
investment.
27) According to Chapter 1, a sentiment that venture capitalists often express is that:
A) the strength of the entrepreneur and the strength of the business idea are of equal importance
B) they would never fund a strong entrepreneur with a weak business idea
C) they would rather fund a strong entrepreneur with a mediocre business idea than fund a strong
business idea with a mediocre entrepreneur
D) a new venture's marketing plan is more important than either the strength of the entrepreneur
or the strength of the business idea
E) they would rather fund a strong business idea with a mediocre entrepreneur than fund a strong
entrepreneur with a mediocre business idea
Answer: C
Rationale:
The correct answer is C. According to Chapter 1, venture capitalists often express a sentiment
that they would rather fund a strong entrepreneur with a mediocre business idea than fund a
strong business idea with a mediocre entrepreneur. This emphasizes the importance of the
entrepreneur's capabilities in the success of a new venture.
28) Pacific Printing LLC is a startup that is working on a new technology for the printing
industry. Because the technology it's working on is highly proprietary, the company is located in
the warehouse district of a large western city. Pacific's founder, Jan Sims, rarely gives
interviews, and is careful to not divulge much about what the company is doing. Which of the
following common myths about entrepreneurs does the behavior of its founder, Jan Sims, dispel?
A) Entrepreneurs are born, not made.
B) Entrepreneurs are gamblers.
C) Entrepreneurs are motivated primarily by money.
D) Entrepreneurs should be young and energetic.
E) Entrepreneurs love the spotlight.
Answer: E
Rationale:
The correct answer is E. Jan Sims' behavior dispels the common myth that entrepreneurs love the
spotlight. Her reluctance to give interviews and her focus on maintaining secrecy about the
company's technology indicate that she is not motivated by seeking public attention.
29) According to the textbook, there are three types of startup firms:
A) lifestyle firms, general firms, and entrepreneurial firms
B) standard-of-living firms, statutory firms, and general firms
C) entrepreneurial firms, standard-of-living firms, and statutory firms
D) lifestyle firms, salary-substitute firms, and entrepreneurial firms
E) innovative firms, entrepreneurial firms, and standard firms
Answer: D
Rationale:
The correct answer is D. According to the textbook, the three types of startup firms are lifestyle
firms, salary-substitute firms, and entrepreneurial firms. These categories describe different
motivations and goals of entrepreneurs when starting their businesses.
30) According to the textbook, there are three types of startup firms: entrepreneurial firms,
lifestyle firms, and:
A) civil firms
B) salary-substitute firms
C) statutory firms
D) standard-of-living firms
E) innovative firms
Answer: B
Rationale:
The correct answer is B. According to the textbook, the three types of startup firms are
entrepreneurial firms, lifestyle firms, and salary-substitute firms. Salary-substitute firms are
those started by individuals who want to create a job for themselves that provides a similar
income to what they could earn working for others.
31) Kentucky Soup and Salad is a casual dining restaurant that has been owned by Kenneth
Peterson for the past 11 years. The restaurant offers a menu that is typical for casual dining
restaurants and affords Kenneth a level of income that is similar to what he would earn in a
conventional job. According to the textbook, Kentucky Soup and Salad is an example of a(n):
A) salary-substitute firm
B) entrepreneurial firm
C) quality-of-life firm
D) lifestyle firm
E) industry-standard firm
Answer: A
Rationale:
The correct answer is A. Kentucky Soup and Salad is classified as a salary-substitute firm
because it provides Kenneth with a level of income similar to what he would earn in a
conventional job, essentially substituting his salary.
32) Tahoe Trips & Trails, a company mentioned in Chapter 1, leads multiday outdoor adventure
trips for private groups and corporate clients to Lake Tahoe, Yosemite, Death Valley, and similar
locations. The company was started by Hanna Sullivan, an individual that gave up a prestigious
job with a private investment company because Tahoe Trips & Trails better accommodates her
personal lifestyle. Tahoe Trips & Trails is an example of a(n) ________ firm.
A) entrepreneurial
B) salary-substitute
C) standard-of-living
D) statutory
E) lifestyle
Answer: E
Rationale:
The correct answer is E. Tahoe Trips & Trails is classified as a lifestyle firm because it was
started by Hanna Sullivan to better accommodate her personal lifestyle, despite giving up a
prestigious job.
33) Entrepreneurial firms:
A) are small firms that yield a level of income for their owner or owners that is similar to what
they would earn when working for an employer
B) bring to market new products and services that are not particularly innovative
C) offer to customers common products that are not particularly innovative, and provide their
owner or owners the opportunity to pursue a particular lifestyle and earn a living while doing so
D) provide their owner or owners the opportunity to pursue a particular lifestyle and earn a living
while doing so
E) bring new products and services to market by creating and seizing opportunities
Answer: E
Rationale:
The correct answer is E. Entrepreneurial firms bring new products and services to market by
creating and seizing opportunities. They are typically innovative and focused on growth.
34) According to the textbook, Google, Facebook, and Zynga are examples of ________ firms.
A) lifestyle
B) salary-substitute
C) industry-standard
D) entrepreneurial
E) standard-of-living
Answer: D
Rationale:
The correct answer is D. Google, Facebook, and Zynga are examples of entrepreneurial firms
because they have brought new products and services to market and have experienced significant
growth.
35) Which of the following statements is not true about women-owned businesses in the United
States?
A) There are a growing number of groups that support and advocate for women-owned
businesses.
B) Women-owned firms still trail male-owned businesses in terms of sales and profits.
C) The top industry for women-owned firms is manufacturing.
D) Over 50% of women-owned firms are home-based.
E) The number of women-owned businesses is increasing.
Answer: C
Rationale:
The correct answer is C. The statement that the top industry for women-owned firms is
manufacturing is not true. The top industries for women-owned firms are typically services,
retail, and health care.
36) Among minorities, ________ -owned firms had the highest growth rate from 1996 to 2010.
A) Pacific Islander
B) Asian American
C) African American
D) Latino
E) American Indian
Answer: D
Rationale:
The correct answer is D. Among minorities, Latino-owned firms had the highest growth rate
from 1996 to 2010, according to the textbook.
37) Which of the following was not given in the textbook as a reason for the increase in the
number of senior entrepreneurs?
A) Seniors tend to be more passionate about new business ideas than middle-aged or younger
prospective entrepreneurs.
B) Many seniors have extensive business experience and other qualities that equip them for an
entrepreneurial career.
C) Growing worries among seniors that they need to earn additional income to pay for future
health care services and other expenses
D) An increasing desire among older workers for more personal fulfillment in their lives
E) corporate downsizing
Answer: A
Rationale:
The correct answer is A. While many seniors may be passionate about new business ideas, the
textbook does not specifically mention this as a reason for the increase in the number of senior
entrepreneurs.
38) At the high school and younger level, according to a Harris Interactive Survey, ________
said they'd like to start their own business someday.
A) 10%
B) 20%
C) 30%
D) 40%
E) 50%
Answer: D
Rationale:
The correct answer is D. According to the Harris Interactive Survey, 40% of high school and
younger students said they'd like to start their own business someday.
39) As new products that are better than the existing generation of products are introduced, sales
normally increase because the new products provide consumers increased value or worth. This
process, which is called ________, stimulates economic activity, which is a good thing for the
economy.
A) creative destruction
B) repetitive destruction
C) iterative replacement
D) inventive replacement
E) iterative destruction
Answer: A
Rationale:
The correct answer is A. Creative destruction is the process by which new products that are
better than existing products are introduced, leading to increased sales and economic activity.
40) In the book The Theory of Economic Development, ________ argued that entrepreneurs
develop new products and technologies that over time make current products and technologies
obsolete. This process is called creative destruction.
A) Michael Porter
B) H.H. Stevenson
C) Joseph Schumpeter
D) Thomas Friedman
E) Jim Collins
Answer: C
Rationale:
The correct answer is C. Joseph Schumpeter argued in The Theory of Economic Development
that entrepreneurs develop new products and technologies that make current products and
technologies obsolete, a process he called creative destruction.
41) According to the textbook, entrepreneurship has historically had:
A) a major impact on the economy and minor impact on society
B) a minor impact on both the economy and society
C) a major impact on society and minor impact on the economy
D) a major impact on both the economy and society
E) no impact on either the economy or society
Answer: D
Rationale:
The correct answer is D. Entrepreneurship has historically had a major impact on both the
economy and society, driving innovation, job creation, and economic growth.
42) ________ is the process of creating something new, which is central to the entrepreneurial
process.
A) Creative destruction
B) Modernism
C) Execution
D) Creativity
E) Innovation
Answer: E
Rationale:
The correct answer is E. Innovation is the process of creating something new, which is central to
the entrepreneurial process.
43) In regard to patent activity (issuance), which of the following statements is correct?
A) Small businesses outperform their larger counterparts.
B) Small businesses underperform their larger counterparts.
C) Small businesses and large businesses are relatively equal.
D) Small businesses are not active in patent activity.
E) Large businesses are not active in patent activity.
Answer: A
Rationale:
The correct answer is A. Small businesses outperform their larger counterparts in terms of patent
activity, indicating their innovative capabilities.
44) Which of the following statements is incorrect regarding the economic impact of
entrepreneurial firms in the United States?
A) Small businesses outperform their larger counterparts in terms of patent activity.
B) Small firms are providers of a significant share of the innovations that take place.
C) According to a Kauffman Foundation survey, 92% of Americans say entrepreneurs are
critically important to job creation.
D) Small businesses employ just less than half of all private sector employees.
E) Small businesses are the creators of most new jobs.
Answer: D
Rationale:
The correct answer is D. Small businesses actually employ just over half of all private sector
employees, not just less than half.
45) The Partnering for Success feature in Chapter 1 focuses on how pharmaceutical products are
brought to market. The "lesson learned" from the feature for entrepreneurs is:
A) large firms and smaller entrepreneurial firms can often produce the best results by partnering
with each other rather than acting as adversaries
B) it rarely works out for large firms and smaller entrepreneurial firms to partner with each other,
particularly in the pharmaceutical industry
C) the most compelling partnerships between smaller entrepreneurial firms and large firms allow
both categories of firms to be generalists, and not focus strictly on their areas of expertise
D) partnerships between smaller entrepreneurial firms and large firms almost always favor the
smaller entrepreneurial firms, particularly in the pharmaceutical industry
E) partnerships between smaller entrepreneurial firms and large firms almost always favor the
large firm, particularly in the pharmaceutical industry
Answer: A
Rationale:
The correct answer is A. The lesson learned is that large firms and smaller entrepreneurial firms
can often produce the best results by partnering with each other rather than acting as adversaries,
particularly in the pharmaceutical industry.
46) Which of the following is the correct sequence for the four steps in the entrepreneurial
process?
A) deciding to become an entrepreneur, developing successful business ideas, moving from an
idea to an entrepreneurial firm, managing the growing entrepreneurial firm
B) developing successful business ideas, deciding to become an entrepreneur, moving from an
idea to an entrepreneurial firm, managing and growing the entrepreneurial firm
C) developing successful business ideas, moving from an idea to an entrepreneurial firm,
deciding to become an entrepreneur, managing and growing the entrepreneurial firm
D) deciding to become an entrepreneur, moving from an idea to an entrepreneurial firm,
developing successful business ideas, managing and growing the entrepreneurial firm
E) managing and growing the entrepreneurial firm, developing successful business ideas,
deciding to become an entrepreneur, moving from an idea to an entrepreneurial firm
Answer: A
Rationale:
The correct answer is A. The correct sequence for the four steps in the entrepreneurial process is:
1) deciding to become an entrepreneur, 2) developing successful business ideas, 3) moving from
an idea to an entrepreneurial firm, and 4) managing the growing entrepreneurial firm.
47) Which of the following is not one of the four steps of the entrepreneurial process?
A) deciding to become an entrepreneur
B) determining how to seize the spotlight
C) developing successful business ideas
D) moving from an idea to an entrepreneurial firm
E) managing and growing the entrepreneurial firm
Answer: B
Rationale:
The correct answer is B. Determining how to seize the spotlight is not one of the four steps of the
entrepreneurial process. The four steps are: 1) deciding to become an entrepreneur, 2) developing
successful business ideas, 3) moving from an idea to an entrepreneurial firm, and 4) managing
and growing the entrepreneurial firm.
48) An event that prompts an individual to become an entrepreneur, such as losing a job,
inheriting money, or accommodating a certain lifestyle, is referred to as a(n):
A) prompting event
B) entrepreneurial prompt
C) initiating event
D) triggering event
E) kick-off event
Answer: D
Rationale:
The correct answer is D. An event that prompts an individual to become an entrepreneur, such as
losing a job or inheriting money, is referred to as a triggering event.
49) A(n) ________ is a written document that describes all the aspects of a business venture in a
concise manner.
A) business plan
B) business model
C) operations plan
D) corporate plan
E) contingency plan
Answer: A
Rationale:
The correct answer is A. A business plan is a written document that describes all the aspects of a
business venture in a concise manner.
50) A firm's ________ is a plan for how it competes, uses its resources, structures its
relationships, interfaces with customers, and creates value to sustain itself on the basis of the
value it creates.
A) business plan
B) business model
C) tactical model
D) strategic plan
E) operations model
Answer: B
Rationale:
The correct answer is B. A firm's business model is a plan for how it competes, uses its
resources, structures its relationships, interfaces with customers, and creates value to sustain
itself on the basis of the value it creates.
51) According to the opening feature on GiftZip, raising funding was the biggest challenge that
Sam Hogg experienced in making his company a success.
Answer: False
Rationale:
The opening feature on GiftZip highlights the challenges faced by Sam Hogg, with the biggest
challenge being competition, not raising funding.
52) According to the results of the GEM 2010 survey, about 1 out of every 13 American adults is
actively engaged in starting a business or is the owner/manager of a business that is less than 3
1/2 years old.
Answer: True
Rationale:
This statement is true according to the GEM 2010 survey, which indicates a significant level of
entrepreneurial activity in the United States.
53) According to reliable statistics, 9 out of 10 businesses fail in their first few years of
existence.
Answer: False
Rationale:
This statement is false. While business failure rates can be high, the statistic that 9 out of 10
businesses fail in their first few years is an exaggeration. The actual failure rate varies depending
on the industry and other factors.
54) Entrepreneurship is the process by which individuals pursue opportunities within the
constraints of the resources they control.
Answer: False
Rationale:
This statement is false. Entrepreneurship is the process of starting a new business or venture,
which may involve pursuing opportunities, but it is not limited to the constraints of the resources
an individual controls.
55) Established firms with an entrepreneurial emphasis are proactive, innovative, and risk-taking.
Answer: True
Rationale:
This statement is true. Established firms with an entrepreneurial emphasis often exhibit these
characteristics as they seek to innovate and grow in competitive markets.
56) The number one reason that people become entrepreneurs is to be their own boss.
Answer: True
Rationale:
This statement is true. Many people are motivated to become entrepreneurs because they desire
the autonomy and control that comes with being their own boss.
57) The number one characteristic shared by successful entrepreneurs is passion for the business.
Answer: True
Rationale:
This statement is true. Passion for the business is often cited as a key characteristic among
successful entrepreneurs, as it drives their commitment and dedication to their ventures.
58) The four main characteristics of successful entrepreneurs are: passion for the business,
execution intelligence, product/customer focus, and tenacity despite failure.
Answer: True
Rationale:
This statement is true. These characteristics are commonly cited as important traits among
successful entrepreneurs.
59) The passion that entrepreneurs have typically stems from the potential financial rewards that
are associated with an entrepreneurial career.
Answer: False
Rationale:
This statement is false. While financial rewards can be a motivating factor for some
entrepreneurs, passion for the business and the desire to make a difference are often cited as
more significant drivers.
60) According to the consensus of the research, some people are genetically predisposed to be
entrepreneurs.
Answer: False
Rationale:
This statement is false. While there may be genetic factors that influence personality traits
associated with entrepreneurship, such as risk-taking propensity, there is no consensus that some
people are genetically predisposed to be entrepreneurs.
61) Entrepreneurs are usually moderate, rather than high, risk-takers.
Answer: True
Rationale:
Entrepreneurs are often viewed as moderate risk-takers because they carefully evaluate risks and
take calculated chances rather than engaging in reckless behavior.
62) Entrepreneurs are motivated primarily by money.
Answer: False
Rationale:
While financial gain can be a motivating factor for some entrepreneurs, many are driven by a
passion for their business idea, a desire to solve a problem, or a goal to make a positive impact.
63) In terms of the "types" of startup firms, entrepreneurial firms bring new products and
services to market.
Answer: True
Rationale:
Entrepreneurial firms are often associated with innovation and the introduction of new products
or services to the market.
64) Over the past 10 years, the demographic makeup of entrepreneurial firms has remained fairly
stable in the United States and around the world.
Answer: False
Rationale:
The demographic makeup of entrepreneurial firms has been changing, with increasing
participation from women, minorities, seniors, and young people, leading to a more diverse
entrepreneurial landscape.
65) Of the 27.5 million businesses in the United States, women, minorities, seniors, and young
people increasingly own a smaller number of them.
Answer: False
Rationale:
Women, minorities, seniors, and young people are increasingly owning a larger number of
businesses, contributing to the diversification of the entrepreneurial landscape.
66) Unfortunately, statistics show that there is very little interest in entrepreneurship among
young entrepreneurs in the United States.
Answer: False
Rationale:
There is actually a growing interest in entrepreneurship among young people in the United
States, with many aspiring entrepreneurs starting businesses or pursuing entrepreneurial
ventures.
67) Joseph Schumpeter argued that entrepreneurs develop new products and technologies that
over time make current products and technologies obsolete, and this process, which he called
creative destruction, is good because it stimulates economic activity.
Answer: True
Rationale:
Joseph Schumpeter's theory of creative destruction suggests that the process of innovation and
the introduction of new products and technologies are essential for economic growth and
progress.
68) Innovation is the process of creating something new, which is central to the entrepreneurial
process.
Answer: True
Rationale:
Innovation is a key aspect of entrepreneurship, as entrepreneurs often create new products,
services, or business models to meet market needs or solve problems.
69) Small businesses outperform their larger counterparts in terms of patent activity (issuance).
Answer: True
Rationale:
Small businesses are often more innovative and agile than larger corporations, leading to a
higher rate of patent activity among small firms.
70) The entrepreneurial process consists of four steps: deciding to become an entrepreneur,
developing successful business ideas, moving from an idea to an entrepreneurial firm, and
divesting or selling the entrepreneurial firm.
Answer: False
Rationale:
The entrepreneurial process typically consists of four steps: identifying opportunities, developing
a business concept, resourcing the venture, and managing and growing the venture. Divesting or
selling the entrepreneurial firm is not always a part of the process, as some entrepreneurs may
choose to continue growing their businesses.
71) What is entrepreneurship? What is the essence of entrepreneurial behavior?
Answer: Entrepreneurship is the process by which individuals pursue opportunities without
regard to the resources they currently control. The essence of entrepreneurial behavior is
identifying opportunities and putting useful ideas into practice.
72) Describe the three primary reasons that people become entrepreneurs and start their own
firms.
Answer: The three primary reasons that people become entrepreneurs and start their own firms
are to (1) be their own boss, (2) pursue their own ideas, and (3) realize financial rewards.
The first of these reasons—being one's own boss—is given most commonly. Many entrepreneurs
want to be their own boss because either they have had a long-time ambition to own their own
firm or they have become frustrated working in traditional jobs. The second reason people start
their own firms is to pursue their own ideas. Some people are naturally alert, and when they
recognize ideas for new products or services, they have a desire to see those ideas realized. The
third reason people start their own firms is to pursue financial rewards. This motivation,
however, is typically secondary to the first two.
73) Describe the four main characteristics of successful entrepreneurs.
Answer: The four main characteristics of successful entrepreneurs are: passion for the business,
product/customer focus, tenacity despite failure, and execution intelligence.
The number one characteristic shared by successful entrepreneurs is passion for their business,
whether it is in the context of a new firm or an existing business. This passion typically stems
from the entrepreneur's belief that the business will positively influence people's lives. A second
defining characteristic of successful entrepreneurs is a product/customer focus. This
characteristic underscores two of the most important elements in any business—products and
customers. The third characteristic of successful entrepreneurs is tenacity despite failure.
Because entrepreneurs are typically trying something new, the failure rate associated with their
efforts is naturally high. The litmus test for entrepreneurs is their ability to persevere through
setbacks and failures. The fourth characteristic of successful entrepreneurs is execution
intelligence. The ability to effectively execute a business idea means developing a business
model, putting together a new venture team, raising money, establishing partnerships, managing
finances, leading and motivating employees, and so on.
74) Identify the three types of startup firms, and discuss how they differ. Provide examples of
each type of firm.
Answer: The three types of startup firms are: salary-substitute firms, lifestyle firms, and
entrepreneurial firms.
Salary-substitute firms are small firms that afford their owners a level of income similar to what
they would earn in a conventional job. Examples of salary-substitute firms are dry cleaners,
convenience stores, restaurants, accounting firms, retail stores, and hairstyling salons. Lifestyle
firms provide their owner or owners the opportunity to pursue a particular lifestyle and earn a
living while doing so. Examples of lifestyle firms include ski instructors, golf pros, and tour
guides. Entrepreneurial firms bring new products and services to market by creating and seizing
opportunities. There are many examples of entrepreneurial firms in computer software,
biotechnology, and medical devices.
75) Identify and discuss the three primary reasons that entrepreneurial behavior has a strong
impact on the United States economy.
Answer: The two reasons that entrepreneurial behavior has a strong impact on the United States
economy are as follows: innovation and job creation
Innovation is the process of creating something new, which is central to the entrepreneurial
process. According to a 2010 Small Business Administration report, small firms (fewer than 500
employees) are providers of a significant share of the innovations that take place in the United
States. In regard to job creation, entrepreneurial firms play a major role. Small businesses
employ more than half of all private sector employees in the United States and create most new
jobs.
Test Bank for Entrepreneurship: Successfully Launching New Ventures
Bruce R. Barringer, R. Duane Ireland
9780132555524, 9780131393905, 9780134729534, 9780133797190
