Entrepreneurship: Successfully Launching New Ventures, 5e, Global Edition
(Barringer/Ireland)
Chapter 9 Building a New-Venture Team
1) 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
2) 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
3) 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
4) The Partnering for Success feature in Chapter 9 focuses on a technique that entrepreneurs use
to overcome the liabilities of newness. The suggestion made by the feature is to overcome the
liabilities of newness by considering ________.
A) interviewing a minimum of 20 startup founders to get a sense of what made them successful
B) working in the new product development or corporate innovation division of a major
corporation
C) working for a startup for a minimum of two years before starting one
D) earning an MBA
E) joining a startup accelerator
5) 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.
6) Describe the term “liability of newness” and suggest several ways that a new venture can
overcome this handicap.
7) Next Big Sound, the company profiled in the opening feature of Chapter 9, is a music
analytics company. Which of the following statements in incorrect regarding Next Big Sound’s
co-founders, its personnel policies or the company itself?
A) Next Big Sound has three co-founders.
B) The co-founders have healthy debates, but are able to come to consensus and get along and
trust one another.
C) Because the co-founders could not agree who would be the company’s CEO, the three share
the title of co-CEOs.
D) The idea for Next Big Sound was created at a Startup Weekend event in San Francisco.
E) The firm is in located in New York, New York.
8) 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
9) Kathy Denver is preparing to launch a home security firm. The team of people that will launch
Kathy’s firm are as follows: Kathy (CEO), Trevor (VP-Finance), Shelia (VP-Sales), a four-
person Board of Directors, a five-person Board of Advisors, and Kathy’s primary investor, who
will assume an advisory role. The group of people that will launch Kathy’s firm is called its
________.
A) startup squad
B) new venture panel
C) new venture team
D) startup cadre
E) startup troop
10) 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
11) According to the textbook, studies show that more than one individual starts ________
percent of all new firms.
A) 20 to 25
B) 50 to 70
C) 5 to 15
D) 30 to 40
E) 75 to 90
12) 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.
13) 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.
14) 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
15) The members of homogeneous teams are ________ in terms of their ________.
A) diverse; abilities and experiences
B) diverse; abilities, but very similar in terms of their experiences
C) similar; abilities and experiences
D) diverse; experiences, but very similar in terms of their abilities
E) sometimes diverse; abilities and experiences and sometimes similar along the same
dimensions
16) 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.
17) According to the textbook, prior entrepreneurial experience ________.
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
18) Which of the following statements is not true regarding the attributes of the founder(s) 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.
19) Which of the following qualities was not identified in the textbook as a preferred attribute of
the founder(s) 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
20) 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
21) 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
22) Sam Simpson is a four time business owner. One thing that has served Sam 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, Sam is a good ________.
A) networker
B) socializer
C) linker
D) assembler
E) connector
23) 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
24) 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
25) 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) skills of a company’s customers and how those skills impact the products and services a
company provides
26) 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 (e.g., 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
27) A(n) ________ is a person who works for a business as an apprentice or trainee for the
purpose of obtaining actual experience.
A) freelancer
B) consultant
C) intern
D) virtual assistant
E) novice
28) A(n) ________ is a person who is in business for themselves, works on their own time with
their own tools and equipment, and performs services for a number of different clients.
A) employee
B) virtual assistant
C) intern
D) trainee
E) freelancer
29) Calvin Tucker is in the process of launching an educational services firm. He plans to
incorporate the firm. Because the firm will be incorporated, Calvin 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
30) A board of directors is typically made up of both ________ and ________ directors.
A) junior; senior
B) inside; outside
C) experienced; inexperienced
D) novice; expert
E) paid; unpaid
31) In the context of boards of directors, a(n) ________ director is a person who is also an
officer of the firm.
A) outside
B) junior
C) inside
D) expert
E) senior
32) In the context of boards of directors, a(n) ________ director is someone who is not employed
by the firm.
A) outside
B) inside
C) external
D) impartial
E) peripheral
33) 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)
________ director.
A) inside
B) outside
C) expert
D) junior
E) senior
34) Adam Miller is a general partner in a venture capital firm that just funded Gold Coast
Software, a software firm in Santa Barbara, California. Gold Coast Software is incorporated, and
Adam has taken a seat on the firm’s board of directors. In board of directors terminology, Keith
is a(n) ________ director.
A) subordinate
B) senior
C) distant
D) inside
E) outside