Preview Extract
Chapter 9 Building a New Venture Team
1) Scripped, the company profiled in the opening feature for Chapter 9, offers Web-based
screenwriting software. Which of the following statements best reflects Scripped's personnel
policy?
A) Scripped has hired aggressively and now has approximately 40 employees.
B) Its three cofounders are its only employees.
C) Scripped was founded by two UCLA MBA students and quickly grew to 10 employees.
D) Its founder is its only employee.
E) It has avoided building a large staff. Its formal employees consist of its three cofounders and
an individual obtained in a merger.
Answer: E
Rationale:
The correct answer is E because it accurately reflects Scripped's personnel policy as described in
the question.
2) A ________ is the group of founders, key employees, and advisers that move a new venture
from an idea to a fully functioning firm.
A) new venture panel
B) startup team
C) new venture team
D) new project team
E) startup cadre
Answer: C
Rationale:
The correct answer is C because it defines the group that plays a key role in launching a new
venture.
3) Jenny Templeton is preparing to launch a home security firm. The team of people that will
launch Jenny's firm are as follows: Jenny (CEO), Brent (VP-Finance), Carrie (VP-Sales), a fourperson Board of Directors, a five-person Board of Advisors, and Jenny's primary investor, who
will assume an advisory role. The group of people that will launch Jenny's firm is called its:
A) startup squad
B) new venture panel
C) new venture team
D) startup cadre
E) startup troop
Answer: C
Rationale:
The correct answer is C because it accurately describes the group of people involved in
launching Jenny's firm.
4) The fact that companies often falter because the people who start the firms can't adjust quickly
enough to their new roles and because the firm lacks a "track record" with outside buyers and
sellers, is referred to as the:
A) liability of preparedness
B) liability of newness
C) burden of novelty
D) burden of freshness
E) millstone of innovation
Answer: B
Rationale:
The correct answer is B because it describes the challenges faced by new companies due to their
lack of experience and reputation.
5) Savanna Combs opened a clothing boutique two years ago. Unfortunately, the boutique failed
after 18 months. Savanna attributes the failure of her boutique to the facts that her employees
couldn't adjust quickly enough to their new roles and that her boutique lacked a "track record"
with outside buyers and sellers, which made it difficult to form partnerships and make sales.
Savanna suffered from what research calls the:
A) burden of novelty
B) millstone of innovation
C) liability of newness
D) liability of preparedness
E) burden of newness
Answer: C
Rationale:
The correct answer is C because it describes the challenges faced by new ventures due to their
lack of experience and track record.
6) The high failure rate among new ventures is due in part to the liability of newness, which
refers to the fact that new companies often falter because:
A) they are underfunded and the founders of the firms don't move quickly enough to put together
boards of directors and boards of advisors that can provide them direction and advice
B) the founders of the firms underestimate the complexities involved with starting a new
business and the firms lack a "track record" with outside buyers and sellers
C) the people who start the firms can't adjust quickly enough to their new roles and the firms
lack a "track record" with outside buyers and sellers
D) the people who start the firms can't adjust quickly enough to their new roles and they are
underfunded
E) the founders of the firms underestimate the complexities involved with starting a new
business and they don't move quickly enough to establish business partnerships
Answer: C
Rationale:
The correct answer is C because it accurately describes the challenges faced by new companies
due to the lack of experience and reputation.
7) Which of the following was not identified in the textbook as an element of a new venture
team?
A) board of advisors
B) suppliers and vendors
C) key employees
D) lenders and investors
E) management team
Answer: B
Rationale:
The correct answer is B because suppliers and vendors are not typically considered elements of a
new venture team.
8) According to the textbook, studies show that more than one individual starts ________ of all
new firms.
A) 20 to 25 percent
B) 50 to 70 percent
C) 5 to 15 percent
D) 30 to 40 percent
E) 75 to 90 percent
Answer: B
Rationale:
The correct answer is B because it reflects the proportion of new firms that are started by more
than one individual.
9) The What Went Wrong feature in Chapter 9 focuses on Deever, a 2008 startup that helped
software developers use cloud-based services to "test" their code in an expedient manner.
According to the feature, one of the primary reasons Deever failed was:
A) it lacked a cofounder who loved the business side of running a startup
B) the cofounders couldn't get along
C) it didn't build a robust partnership network
D) it didn't solicit advice from attorneys, bankers or business consultants
E) it didn't have a Board of Advisors
Answer: A
Rationale:
The correct answer is A because it identifies a key reason for Deever's failure based on the
information provided.
10) Which of the following statements is untrue regarding founding teams?
A) The members of heterogeneous teams are diverse in terms of their abilities and experiences.
B) The members of homogenous teams are very similar in terms of their abilities and
experiences.
C) Teams that have worked together before have an edge.
D) Studies show that more than one individual starts 50 to 70 percent of all new firms.
E) It is generally believed that new ventures started by an individual have an advantage over new
ventures started by a team.
Answer: E
Rationale:
The correct answer is E because it contradicts the commonly held belief that new ventures
started by a team have an advantage over those started by an individual.
11) Which of the following statements is incorrect regarding founding teams?
A) The members of heterogeneous teams are diverse in terms of their abilities and experiences.
B) Teams that are working together for the first time have an advantage over teams that have
worked together before.
C) The psychological support that cofounders of a new business can offer one another is an
important element of a firm's success.
D) The members of homogeneous teams are very similar in terms of their abilities and
experiences.
E) Studies show that more than one individual starts 50 to 70 percent of all new teams.
Answer: B
Rationale:
The correct answer is B because teams that have worked together before often have an advantage
due to their established communication and collaboration patterns.
12) The members of heterogeneous teams are:
A) diverse in terms of their abilities and experiences
B) diverse in terms of their abilities, but very similar in terms of their experiences
C) similar in terms of their abilities and experiences
D) diverse in terms of their experiences, but very similar in terms of their abilities
E) sometimes diverse in terms of their abilities and experiences and sometimes similar along the
same dimensions
Answer: A
Rationale:
The correct answer is A because heterogeneous teams are made up of members with different
abilities and experiences.
13) The members of homogeneous teams are:
A) diverse in terms of their abilities and experiences
B) diverse in terms of their abilities, but very similar in terms of their experiences
C) similar in terms of their abilities and experiences
D) diverse in terms of their experiences, but very similar in terms of their abilities
E) sometimes diverse in terms of their abilities and experiences and sometimes similar along the
same dimensions
Answer: C
Rationale:
The correct answer is C because homogeneous teams are made up of members who are similar in
terms of their abilities and experiences.
14) According to the textbook, which of the following statements is inaccurate regarding the size
and composition of the founding team of a firm?
A) There is no relationship between a founding team's size and its effectiveness.
B) A founding team larger than four people is typically too large to be practical.
C) The members of a homogeneous founding team are similar in terms of their abilities and
experiences.
D) The members of a heterogeneous founding team are diverse in terms of their abilities and
experiences.
E) A founding team can be too big, causing communication problems and increasing potential
for conflict.
Answer: A
Rationale:
The correct answer is A because the size of a founding team can impact its effectiveness.
15) According to the textbook, prior entrepreneurial experiences:
A) is one of the poorest predictors of future entrepreneurial performance
B) is one of the most consistent predictors of future entrepreneurial performance for
entrepreneurs under 50 years of age but not for entrepreneurs over 50 years of age
C) is one of the most consistent predictors of future entrepreneurial performance
D) is one of the most consistent predictors of future entrepreneurial performance in service firms
but not in manufacturing firms
E) has no relationship to future entrepreneurial performance
Answer: C
Rationale:
The correct answer is C because prior entrepreneurial experience is considered a consistent
predictor of future entrepreneurial performance.
16) Which of the following statements is not true regarding the attributes of the founder or
founders of a firm?
A) Evidence suggests that important entrepreneurial skills are enhanced through higher
education.
B) Founders with prior entrepreneurial experience are more likely to avoid costly mistakes.
C) Founders with experience in the same industry as their new ventures will typically have
"blinders" on and are typically not as effective as founders new to the industry.
D) Founders with broad social and professional networks have an advantage.
E) New ventures that are started by a team rather than an individual have an advantage.
Answer: C
Rationale:
The correct answer is C because founders with experience in the same industry can bring
valuable insights and expertise to their new ventures.
17) Which of the following qualities was not identified in the textbook as a preferred attribute of
the founder or founders of a firm?
A) prior entrepreneurial experience
B) firm started by a team
C) relevant industry experience
D) prior experience working in a government or university position
E) higher education
Answer: D
Rationale:
The correct answer is D because prior experience working in a government or university position
is not typically considered a preferred attribute of founders, according to the textbook.
18) The process of building and maintaining relationships with people whose interests are similar
or whose relationship could bring advantages to the firm is called:
A) linking
B) socializing
C) networking
D) associating
E) connecting
Answer: C
Rationale:
The correct answer is C because networking involves establishing and maintaining relationships
for mutual benefit.
19) Ned Kite is a four-time business owner. One thing that has served Ned well throughout his
entrepreneurial career is his ability to build and maintain relationships with people whose
interests are similar or whose relationships could bring advantages to his new ventures.
According to the textbook, Ned is a good:
A) networker
B) socializer
C) linker
D) assembler
E) connector
Answer: A
Rationale:
The correct answer is A because networking involves building relationships for mutual benefit,
which aligns with Ned's ability to leverage his relationships for his new ventures.
20) A(n) ________ is a chart that depicts the most important skills that are needed in a new
venture and where skills gaps exist.
A) expertise report
B) talent profile
C) abilities summary
D) skills profile
E) talent summary
Answer: D
Rationale:
The correct answer is D because a skills profile is a tool used to assess the skills needed for a
new venture and identify any gaps in those skills.
21) Jason Andersen just finished writing a business plan for a new type of office supply store.
One thing Jason included in the "Management Team & Company Structure" section of his
business plan is a chart that depicts the most important skills that are needed for his business and
where skills gaps exist. Jason included a(n)________ in his business plan.
A) skills profile
B) talent report
C) abilities profile
D) expertise report
E) talent summary
Answer: A
Rationale:
The correct answer is A because a skills profile is a chart that depicts the most important skills
needed for a business and identifies any skills gaps.
22) A skills profile is a chart that depicts the:
A) preferable skills and abilities of the members of a firm's board of advisors
B) preferable skills and abilities of the members of a firm's board of directors
C) most important skills that are needed in a business startup and where skills gaps exist
D) skills and abilities that will be needed for a firm to maintain an aggressive growth strategy
E) the skills of a company's customers and how those skills impact the product and services a
company provides
Answer: C
Rationale:
The correct answer is C because a skills profile specifically focuses on the skills needed in a
business startup and identifies any skills gaps.
23) The Savvy Entrepreneurial Firm feature in Chapter 9 focuses on how business founders
overcome a lack of business experience. Which of the following was not mentioned as a practical
way for a new business founder to overcome a lack of business experience?
A) hiring consultants from a major consulting firm, like Bain & Company or McKinsey &
Company
B) taking on a partner that has business experience
C) getting help from a Small Business Development Center
D) joining a Meetup group
E) participating in online forums
Answer: A
Rationale:
The correct answer is A because hiring consultants from major consulting firms was not
mentioned as a practical way for a new business founder to overcome a lack of business
experience in the feature.
24) A 2011 survey conducted by the University of Maryland's School of Business and Network
Solutions asked small business owners how well they competed with other companies for good
employees, and only ________ said they were successful.
A) 16 percent
B) 28 percent
C) 30 percent
D) 46 percent
E) 66 percent
Answer: D
Rationale:
The correct answer is D because it reflects the percentage of small business owners who reported
success in competing for good employees in the survey.
25) If a new venture organizes as a corporation, it is legally required to have a(n) ________,
which is a panel of individuals who are elected by a corporation's shareholders to oversee the
management of the firm.
A) board of advisors
B) review team
C) team of advisors
D) accountability panel
E) board of directors
Answer: E
Rationale:
The correct answer is E because a board of directors is legally required for a corporation and is
elected by shareholders to oversee the firm's management.
26) Kate Harrison is in the process of launching an educational services firm. She plans to
incorporate the firm. Because the firm will be incorporated, Kate is legally required to have a:
A) board of investors
B) board of advisors
C) customer advisory board
D) board of directors
E) panel of advisors and peers
Answer: D
Rationale:
The correct answer is D because a board of directors is legally required for incorporated firms to
oversee management.
27) A board of directors is typically made up of both:
A) junior and senior directors
B) inside and outside directors
C) experienced and inexperienced directors
D) novice and expert directors
E) paid and unpaid directors
Answer: B
Rationale:
The correct answer is B because a board of directors typically includes both inside directors
(who are also officers of the firm) and outside directors (who are not employees of the firm).
28) The panel of individuals who are elected by a corporation's shareholders to oversee the
management of the firm is called the:
A) board of advisors
B) accountability panel
C) advisory team
D) panel of directors
E) board of directors
Answer: E
Rationale:
The correct answer is E because a board of directors is elected by shareholders to oversee the
management of a corporation.
29) A board of directors is typically made up of both inside and ________ directors.
A) leading
B) subordinate
C) specialist
D) outside
E) impartial
Answer: D
Rationale:
The correct answer is D because a board of directors typically includes both inside directors
(who are also officers of the firm) and outside directors (who are not employees of the firm).
30) In the context of boards of directors, a(n) ________ is a person who is also an officer of the
firm.
A) outside director
B) junior director
C) inside director
D) expert director
E) senior director
Answer: C
Rationale:
The correct answer is C because an inside director is a member of a board of directors who is
also an officer of the firm.
31) In the context of boards of directors, a(n) ________ is someone who is not employed by the
firm.
A) outside director
B) inside director
C) external director
D) impartial director
E) peripheral director
Answer: A
Rationale:
The correct answer is A because an outside director is someone who is not employed by the firm
but serves on its board of directors.
32) James Williams is the Chief Operating Officer of a startup in the health food industry. He is
also a member of his firm's board of directors. In board of directors terminology, James is a(n):
A) inside director
B) outside director
C) expert director
D) junior director
E) senior director
Answer: A
Rationale:
The correct answer is A because an inside director is a member of a firm's board of directors who
is also an officer of the firm.
33) Keith Barnes is a general partner in a venture capital firm that just funded South Florida
Software, a software firm in Coral Gables, Florida. South Florida Software is incorporated, and
Keith has taken a seat on the firm's board of directors. In board of directors terminology, Keith is
a(n):
A) subordinate director
B) senior director
C) distant director
D) inside director
E) outside director
Answer: E
Rationale:
The correct answer is E because Keith Barnes is not employed by South Florida Software and
serves on its board of directors, making him an outside director.
34) A board of directors has three formal responsibilities:
A) periodically update the firm's business plan, declare dividends, and write the firm's marketing
plan
B) appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation
C) write the firm's strategic plan, declare dividends, and conduct the annual meeting
D) appoint the officers of the firm, conduct the annual meeting, and submit the firm's annual
report to the Securities & Exchange Commission
E) provide funding to the firm, write the firm's strategic plan, and submit the firm's annual report
to the Securities & Exchange Commission
Answer: B
Rationale:
The correct answer is B because a board of directors is responsible for appointing officers,
declaring dividends, and overseeing the firm's affairs.
35) A board of directors has three formal responsibilities: appoint the officers of the firm,
oversee the affairs of the corporation, and:
A) conduct the annual meeting
B) provide funding for the firm
C) submit the firm's annual report to the stockholders
D) declare dividends
E) write the firm's strategic plan
Answer: D
Rationale:
The correct answer is D because a board of directors is responsible for declaring dividends to
shareholders.
36) A board of directors has three formal responsibilities: appoint the officers of the firm, declare
dividends, and:
A) write the firm's strategic plan
B) conduct the annual meeting
C) provide funding for the firm
D) represent the firm in public relations activities
E) oversee the affairs of the corporation
Answer: E
Rationale:
The correct answer is E because overseeing the affairs of the corporation is a key responsibility
of a board of directors.
37) Which of the following statements is incorrect regarding boards of directors?
A) If a new venture organizes as a corporation, it is not legally required to have a board of
directors, but it is strongly recommended.
B) A board is typically made up of both inside and outside directors.
C) The board is responsible for declaring dividends.
D) Most boards meet formally three or four times a year.
E) The boards for publicly traded companies are required by law to have audit and compensation
committees.
Answer: A
Rationale:
The correct answer is A because if a new venture organizes as a corporation, it is legally required
to have a board of directors, not just strongly recommended.
38) According to the textbook, although a board of directors has formal governance
responsibilities, its most useful role is to:
A) provide guidance and support to the firm's managers
B) submit papers on behalf of the firm to the SEC
C) represent the firm in public relations activities
D) conduct the firm's annual meeting
E) provide funding to the firm
Answer: A
Rationale:
The correct answer is A because providing guidance and support to the firm's managers is a key
role of a board of directors.
39) Andy Zackery just launched a firm in the sporting goods industry. On the day the company
was launched, Andy issued a press release, indicating that the vice president of Brunswick, a
highly respected sporting goods company, had agreed to serve on his board of directors. Andy
knows that such a high-quality appointment will send an important message to his potential
clientele. This phenomenon is referred to as:
A) championing
B) signaling
C) profiling
D) indicating
E) trumping
Answer: B
Rationale:
The correct answer is B because signaling is the phenomenon of using high-quality appointments
to the board of directors to send a positive message to stakeholders.
40) Melissa Jones just launched a firm in the wireless communications industry. Shortly after the
company was launched, Melissa announced that a prominent Silicon Valley venture capitalist
had agreed to serve on her board of directors. Melissa knows that such a high-quality
appointment will send an important message to her potential business partners and clientele. This
phenomenon is referred to as:
A) trumping
B) championing
C) profiling
D) signaling
E) indicating
Answer: D
Rationale:
The correct answer is D because signaling is the phenomenon of using high-quality appointments
to the board of directors to send a positive message to stakeholders.
41) Which of the following was not identified in the textbook as an attribute of an effective
board of directors?
A) homogeneous set of experiences and talents
B) customer-focused point of view
C) ability and willingness to stand up to the CEO and top managers of the firm
D) strong communication with the CEO
E) decisiveness
Answer: A
Rationale:
A homogeneous set of experiences and talents would limit the board's ability to provide diverse
perspectives and expertise, which are typically seen as valuable attributes for an effective board
of directors.
42) Which of the following was not identified in the textbook as an attribute of an effective
board member?
A) strong personal and professional networks
B) unknown in their field
C) investment and/or operating experience
D) ability and willingness to mentor the CEO and the top managers of the firm
E) pattern recognition skills
Answer: B
Rationale:
Being unknown in their field would likely hinder an individual's effectiveness as a board
member, as they may lack the credibility and expertise necessary to provide valuable insights
and guidance.
43) A(n) ________ is a panel of experts who are asked by a firm's managers to provide counsel
and advice on an ongoing basis.
A) consultation board
B) idea panel
C) counseling panel
D) advisory board
E) suggestion panel
Answer: D
Rationale:
An advisory board is specifically designated to provide ongoing counsel and advice,
distinguishing it from other types of panels that may serve different purposes.
44) William Woods recently launched a printing company. One thing William is thinking about
creating is a panel of experts who can provide him ongoing direction and advice regarding the
future of his business. William is thinking about creating a(n):
A) analysis panel
B) discussion board
C) advisory board
D) suggestion panel
E) accountability panel
Answer: C
Rationale:
An advisory board is precisely what William is considering—a group of experts who can offer
ongoing direction and advice, making it the most suitable option among those listed.
45) Amy Phillips founded a cosmetics firm several years ago. Her firm has grown rapidly and is
financially successful. One thing that Amy attributes her success to is that early on she
assembled a panel of experts who provided her ongoing direction and advice about her business.
What Amy created is called a(n):
A) consultation panel
B) suggestion panel
C) idea board
D) accountability panel
E) advisory board
Answer: E
Rationale:
An advisory board is a group of experts who provide ongoing direction and advice, making it the
most appropriate term for what Amy has assembled.
46) Which of the following statements about advisory boards is incorrect?
A) The fact that a corporation has a board of directors does not preclude it from establishing one
or more advisory boards.
B) An advisory board can be established for general purposes or can be set up to address a
specific issue or need.
C) Similar to a board of directors, an advisory board has legal responsibility for the firm in
certain areas.
D) An advisory board is a panel of experts who are asked by a firm's managers to provide
counsel and advice on an ongoing basis.
E) A growing number of startups are forming advisory boards.
Answer: C
Rationale:
Advisory boards typically do not have the same legal responsibilities as a board of directors,
which has fiduciary duties to the company and its shareholders. Advisory boards provide nonbinding strategic advice.
47) Which of the following statements about advisory boards is incorrect?
A) If a firm has a board of directors it is not permitted to have an advisory board.
B) Many people are more willing to serve on a company's board of advisors than its board of
directors because it requires less time and there is no potential legal liability involved.
C) Most boards of advisers have between 5 and 15 members.
D) A growing number of startups are forming advisory boards.
E) An advisory board can be established for general purposes or can be set up to address a
specific issue or need.
Answer: A
Rationale:
There is no restriction on a firm having both a board of directors and an advisory board. They
serve different purposes and can coexist within a company's governance structure.
48) According to the textbook, most boards of advisers have between:
A) 5 and 15 members
B) 2 and 4 members
C) 10 and 18 members
D) 2 and 3 members
E) 4 and 7 members
Answer: A
Rationale:
Having between 5 and 15 members allows for a diverse range of expertise and perspectives
while still being manageable in terms of coordination and communication.
49) The Partnering for Success feature in Chapter 9 focuses on iConclude, a company that set up
a customer advisory board. The main point of the feature is:
A) the proper time to set up a customer advisory board is just after a business has been launched
B) the members of a firm's customer advisory board should be as diverse as possible
C) a customer advisory board can be a good source of new product or service ideas
D) the main purpose of a customer advisory board is to assess customer satisfaction
E) setting up a customer advisory board before a business is launched can be a useful way of
getting feedback while a product is being developed
Answer: E
Rationale:
The main point is that setting up a customer advisory board before a business is launched can be
a useful way of getting feedback while a product is being developed, highlighting the value of
early customer input in shaping the business.
50) Which of the following is incorrect regarding the typical role of consultants in business
startups?
A) give professional advice
B) international consulting firms, like Accenture and Bearing Point, are financially beyond the
reach of most small firms
C) consultants fall into two categories: paid consultants and consultants who are made available
for free
D) give expert advice
E) help manage the day-to-day activities of the firm
Answer: E
Rationale:
Consultants typically provide strategic advice and expertise, but they are not typically involved
in managing day-to-day activities, which is the responsibility of the company's management
team.
51) A new venture team is the group of founders, key employees, and advisers that move a new
venture from an idea to a fully functioning firm.
Answer: True
Rationale:
A new venture team consists of individuals who play key roles in developing and launching a
new venture, including founders who conceive the idea, key employees who execute the plan,
and advisers who provide guidance and support.
52) The term "liability of newness" refers to the fact that companies often falter because the
people who start the firms can't adjust quickly enough to their new roles and because the firms
lack "track records" with outside buyers and suppliers.
Answer: True
Rationale:
The liability of newness refers to the challenges that new ventures face due to their lack of
experience and track record, which can make it difficult to establish trust and credibility with
external stakeholders.
53) Studies show that more than one individual starts 80 to 90 percent of all new firms.
Answer: False
Rationale:
Studies show that more than one individual starts only about 50 percent of all new firms, with the
other half being started by a single individual.
54) It is generally believed that new ventures started by an individual have an advantage over
those started by a team.
Answer: False
Rationale:
While there are advantages and disadvantages to both individual and team-based
entrepreneurship, it is not generally believed that ventures started by an individual have a clear
advantage over those started by a team. The effectiveness of the founding approach depends on
various factors.
55) Founding teams that have worked together before, as opposed to teams that are working
together for the first time, have an edge.
Answer: True
Rationale:
Founding teams that have worked together before often have an advantage due to their
established working relationships, understanding of each other's strengths and weaknesses, and
ability to collaborate effectively.
56) Homogeneous teams are diverse in terms of their abilities and experiences.
Answer: False
Rationale:
Homogeneous teams are composed of individuals who are similar in terms of their abilities,
experiences, or backgrounds. They lack diversity, which can be beneficial for problem-solving
and innovation.
57) Prior entrepreneurial experience, relevant industry experience, and networking are attributes
that strengthen the chances of a founder's success.
Answer: True
Rationale:
Prior entrepreneurial experience, relevant industry experience, and networking can provide
founders with valuable skills, knowledge, and connections that increase their chances of success
in starting and growing a new venture.
58) Relevant industry experience is a poor predictor of future entrepreneurial performance.
Answer: False
Rationale:
Relevant industry experience can be a strong predictor of future entrepreneurial performance, as
it provides founders with an understanding of the industry's dynamics, challenges, and
opportunities, which can be critical for success.
59) Networking is building and maintaining relationships with people whose interests are similar
or whose relationship could bring advantages to a firm.
Answer: True
Rationale:
Networking involves developing and nurturing relationships with individuals who share similar
interests or whose connections and influence can benefit a firm, such as potential customers,
suppliers, investors, and partners.
60) A skills profile is a chart that depicts the most important skills that are needed and where
skills gaps exist.
Answer: True
Rationale:
A skills profile is a tool used to assess the skills and competencies of individuals or teams,
identifying both the skills they possess and any gaps that need to be addressed.
61) An increasingly important approach for recruiting employees is via social media sites like
LinkedIn, Facebook, and Twitter.
Answer: True
Rationale:
Social media has become a valuable tool for recruitment due to its wide reach, ability to target
specific demographics, and cost-effectiveness compared to traditional methods.
62) Although a board of directors has formal governance responsibilities, its most useful role is
to provide guidance and support to the firm's managers.
Answer: True
Rationale:
While boards of directors do have formal governance responsibilities, their guidance and support
role is crucial for providing strategic direction and oversight to the firm's managers.
63) An advisory board is a panel of experts who are asked by a firm's managers to provide
counsel and advice on an ongoing basis.
Answer: True
Rationale:
An advisory board is specifically established to provide ongoing counsel and advice to the firm's
managers, typically consisting of experts in various fields relevant to the firm's operations.
64) Similar to a board of directors, an advisory board possesses legal responsibility for the firm.
Answer: False
Rationale:
Unlike a board of directors, an advisory board does not typically have legal responsibility for the
firm. Its role is purely advisory, and its recommendations are not binding.
65) An advisory board can be established for general purposes or can be set up to address a
specific need.
Answer: True
Rationale:
An advisory board can be structured to serve the specific needs of the firm, whether it's for
general strategic advice or to address a particular issue or challenge.
66) The fact that a corporation has a board of directors precludes it from having a board of
advisors.
Answer: False
Rationale:
A corporation can have both a board of directors and a board of advisors, as they serve different
functions. An advisory board provides non-binding strategic advice, while a board of directors
has formal governance responsibilities.
67) Most boards of advisers have between 3 and 5 members.
Answer: False
Rationale:
Most boards of advisers have between 5 and 15 members, allowing for a diverse range of
expertise and perspectives while still being manageable in terms of coordination and
communication.
68) More people are willing to serve on a company's board of directors than board of advisors.
Answer: False
Rationale:
Serving on a board of directors typically involves more time commitment and legal
responsibility compared to a board of advisors, making some individuals more willing to serve
on an advisory board instead.
69) Consultants fall into two categories: paid consultants and consultants who are made available
for free or at a reduced rate through a nonprofit or government agency.
Answer: True
Rationale:
Consultants can be either paid professionals or volunteers who offer their services for free or at a
reduced rate through various organizations.
70) SCORE is a for-profit organization that provides consulting services to small businesses.
Answer: False
Rationale:
SCORE, formerly known as the Service Corps of Retired Executives, is a nonprofit organization
that provides free mentoring and consulting services to small businesses.
71) Describe the term "liability of newness" and suggest several ways that a new venture can
overcome this handicap.
Answer: The term "liability of newness" refers to the fact that companies often falter because the
people who start them aren't able to adjust quickly enough to their new roles and because the
firms lack "track records" with outside buyers and suppliers. Assembling a talented and
experienced new venture team is one path firms can take to overcome these limitations. In
addition, firms able to persuade high-quality individuals to join them as directors or advisers
quickly gain legitimacy with a variety of individuals, such as some of those working inside the
venture as well as some people outside the venture (e.g., suppliers, customers, and investors). In
turn, legitimacy opens doors that otherwise would be closed.
72) Are more firms started by individuals or founding teams? What are the advantages to
founding a firm as a team rather than as an individual?
Answer: Studies show that more than one individual starts 50 to 70 percent of all new firms. It is
generally believed that new ventures started by a team have an advantage over those started by
an individual because a team brings more talent, resources, ideas, and professional contacts to a
new venture than does a sole entrepreneur. In addition, the psychological support that cofounders
of a new business can offer one another is an important element in the firm's success.
73) What is the difference between a heterogeneous and a homogeneous founding team? Which
type of team has the advantage?
Answer: Heterogeneous founding teams are diverse in terms of their abilities and experiences.
Homogeneous founding teams are very similar on the same dimensions. Heterogeneous teams
typically have the advantage. The members of heterogeneous teams are likely to have different
points of view about technology, hiring, decisions, competitive tactics, and other important
activities. These different points of view are likely to generate debate and constructive conflict
among the founders, reducing the likelihood that decisions will be made in haste or without the
airing of alternative points of view.
74) What is a skills profile and what is it used for?
Answer: A skills profile is a chart that depicts the most important skills that are needed in a
startup (such as executive leadership, finance, operations, HR) on the horizontal axis and lists the
members of the new venture team and the skills that each individual contributes on the vertical
axis. The idea is to see whether the skills that are needed to launch a firm are adequately covered
by the members of the new venture team, or whether skills gaps exist that need to be filled.
75) What is SCORE? What is its role in helping a firm fill out its new venture team?
Answer: SCORE is a nonprofit organization that provides free consulting services to small
businesses. SCORE currently has over 13,000 volunteers, who are typically retired business
owners and who counsel in areas as diverse as finance, operations, and sales. SCORE helps a
business fill out its new venture team by providing important advice and direction in areas that
the new venture cannot provide for itself.
Test Bank for Entrepreneurship: Successfully Launching New Ventures
Bruce R. Barringer, R. Duane Ireland
9780132555524, 9780131393905, 9780134729534, 9780133797190
