Entrepreneurship, 3e (Bamford)
Chapter 2 Individual Leadership and Entrepreneurial Start-Ups
1) There is one crucial person in a large organization: the chief executive officer.
2) The excess resources that large companies tend to have to assist them are referred to as
organizational redundancies.
3) Organizational slack allows large organizations flexibility that is not available to smaller
companies.
4) The most important person in an entrepreneurial business is the founder.
5) New entrepreneurial businesses tend to have slack financial resources that they can rely on,
which gives them high flexibility in responding to emergencies.
6) In a small family business, the most important support group is the family.
7) Unlike the owners of entrepreneurial ventures, the people who manage operations at large,
established corporations do not typically have substantial ownership in the company.
8) Large firms can fill market niches that small companies cannot afford to fill.
9) One advantage that a large firm has over a small firm is economies of scale.
10) The unlimited theory suggests that individuals act to maximize their own individual benefit.
11) According to the agency theory, a manager at a large firm is more likely to exploit
organizational resources for his or her own benefit than the owner of a small firm.
12) One of the greatest assets of a small business is the owner.
13) Potential entrepreneurs must determine the level of risk that they are able to tolerate.
14) The break-even point is the time when a new business starts to profit from incoming revenues.
15) In a small business, an owner needs to consider how much debt he or she wants to accumulate
in the business. The greater the debt, the lower the risk tolerance.
16) In the context of risk tolerance, most new business owners must set their risk tolerance based
on the average level of risk in their specific market or industry.
17) The owner must be aware of his or her own tolerance of risk and establish a business that is
consistent with that tolerance.
18) Entrepreneurial orientation relies on an owner’s prior work experience.
19) Bounded rationality offers an individual from outside an industry the unconstrained role of
decision-making that was not previously considered.
20) Future business owners need to understand how their own version of rationality affects their
decision-making.
21) The Myers-Briggs test is used for personality evaluations.
22) A Myers-Briggs test analyzes four variables to indicate the different ways in which individuals
deal with other people and their environment.
23) The philosophy of the Enneagram test is that a person is the result of all the experiences in his
or her life.
24) The Big Five test is composed of five factors in decision-making criteria.
25) In the context of the triggers that encourage new business formations, circumstance motivators
tend to result in more of a defensive positioning.
26) Having very little to lose financially by a failure could be a trigger for a new business.
27) Entrepreneurs driven by circumstantial motivators are often more proactive than those with
personal motivation for starting a business.
28) Small business owners who are driven by circumstance motivators tend to be more proactive
and drive relentlessly toward their goals.
29) The “glass ceiling” refers to the practical reality that many working women face which
prevents them from advancing beyond certain levels of corporate hierarchies.
30) Two triggers for staring a new business are talking to successful entrepreneurs and being laid
off from your job.
31) Family members are in a unique position to keep an individual focused on pursuing the wrong
approach to an issue.
32) The reason a business is called a family business is that the owner’s family plays a critical role
in the success of the business.
33) Established businesses may be hesitant about buying from a start-up small business.
34) A community could have an incubator, which is a facility that houses new businesses and
provides many critical services for them.
35) Business incubators work best with small manufacturing-based firms.
36) One of the negative aspects to being the owner of a family business has to do with firing a
family member.
37) An entrepreneur needs to set limits to how much time he or she spends on a business for it to be
successful.
38) You should start a business doing something you have a passion for because you will spend
more time starting and running the business than if you start a business that does not excite you.
39) ________ occur(s) in large companies that have excess resources such as equipment and
employees.
A) Unlimited boundaries
B) Limited boundaries
C) Organizational slack
D) Organizational resources
40) Identify a true statement about a large firm that has organizational slack.
A) The loss of an employee barely affects the abilities of its workforce.
B) Each employee is crucial to the survival of the firm.
C) The firm’s knowledge is concentrated around a few key personnel.
D) The firm enjoys extreme financial flexibility and can survive huge annual losses if necessary.
41) In contrast to the role of leadership in a typical large organization, the founder of a new
entrepreneurial business tends to play a very critical role because
A) outside experts generally work with entrepreneurial businesses.
B) the concentration of knowledge tends to be with her or him.
C) the founder tends to be the only worker at entrepreneurial businesses.
D) the employees of such new businesses tend to be unskilled or unmotivated.
42) Which of the following is an advantage that small firms have over large businesses?
A) The ability to produce services and products quickly and cheaply
B) Significant financial resources slack
C) The ability to respond quickly to changes
D) Critical knowledge spread across the firms’ human resources pool
43) ________ states that individuals make decisions that maximize their own individual benefits.
A) Individual benefit theory
B) Organizational benefit theory
C) Self-fulfilling prophesy
D) Agency theory
44) Ray, a manager in Fir Tree Inc., a large and established firm, must travel to attend an annual
conference. He books the most convenient flight tickets and a room in a luxurious hotel right next
to the venue of the conference. Ray justifies these decisions by stating that these are time-saving
measures. Ray’s decisions can be best explained ________.
A) by the agency theory
B) as bounded rationality
C) through the Myers-Briggs test
D) as organizational slack
45) Why can a small business owner make decisions quicker than a big business?
A) Because the decision maker is both the owner and the manager of the business
B) Because the owner can delegate the decisions to committees
C) Because managers in big businesses have less knowledge than a small business owner
D) All of these
46) Zeus Cisterns is a large manufacturing firm with several employees. Many of the firm’s
employees are knowledgeable about the firm’s various operations and requirements. Accordingly,
the organization’s functioning is barely affected when an experienced employee quits. Further, in
an emergency, various employees can fulfill any critical role that needs to be handled immediately.
Given these characteristics, Zeus Cisterns can be said to have ________.
A) bounded rationality
B) organizational slack
C) a strong resource network
D) a loyal worker-base
47) In the context of entrepreneurial businesses, which of the following is an advantage that small
businesses have over big businesses?
A) A diverse pool of workers
B) Ability to be financially flexible
C) Large-scale manufacturing
D) Ability to produce small niche products
48) What does a potential entrepreneur need to consider when starting a new business?
A) Risk tolerance
B) Prior experience
C) Personality orientation
D) All of these
49) The break-even point is defined as
A) the time when a firm experiences steady losses during its initial stages of operation.
B) the level where a firm starts to profit from the revenue it makes from its products.
C) the time when a business must liquidate its holdings and declare bankruptcy.
D) the level where revenue coming into the firm is sufficient to cover expenses.