Ch09 Growing Internationalizing the Entrepreneurial Firm PDF

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ch09: Growing & Internationalizing the Entrepreneurial Firm 1. Entrepreneurs are founders and owners of new businesses or managers of existing firms. a. True b. False ANSWER: True 2. Individualistic and low uncertainty-avoidance societies tend to foster relatively fewer entrepreneurs than collectivist societies. a. True b. False ANSWER: False 3. According to the VRIO (value, rarity, imitability, and organizational) framework, resources must be imitable to ensure entrepreneurial success. a. True b. False ANSWER: False 4. Entrepreneurship around the globe is developing relatively equally. a. True b. False ANSWER: False 5. Many SMEs are founded by former employees of large firms who feel frustrated by their inability to translate innovative ideas into realities at the large firms. a. True b. False ANSWER: True 6. An entrepreneurial firm can leverage its (tangible) resources such as financial capital in order to grow, even though it may be short on (intangible) vision and drive. a. True b. False ANSWER: False 7. Compared with domestic transaction costs, international transaction costs are qualitatively lower. a. True b. False ANSWER: False 8. Franchisors usually have complete control over how their technology and brand names are used in the host countries of the franchisees. a. True b. False ANSWER: False 9. Greenfield wholly owned subsidiaries is a method of foreign direct investment. Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm a. True b. False ANSWER: True 10. All firms that internationalize follow a stage model. a. True b. False ANSWER: False 11. One of the biggest advantages of SME licensing and franchising is expanding abroad while risking relatively little capital. ? a. True b. False ANSWER: True 12. Rani is an entrepreneur ready to take her firm abroad. In addition to the tangible resources of her firm, Rani can rely on intangible resources such as vision, drive, and the willingness to take risks. a. True b. False ANSWER: True 13. A benefit to entrepreneurs is that the costs of doing business abroad have fallen due to globalization. a. True b. False ANSWER: True 14. The resource-based view posits that it is largely intangible resources such as vision, drive, and willingness to take risk that fuels entrepreneurship around the globe. a. True b. False ANSWER: True 15. Savvy entrepreneurs have a vested interest in pushing for more entrepreneur-friendly formal institutions in various countries, such as rules governing how to set up new firms and how to reduce the pain for failed entrepreneurs and their firms. a. True b. False ANSWER: True 16. Greyon Designs Inc. is a company based in the United States. It has employed 400 employees and deals with delivering customized furniture. In this scenario, Greyon Designs Inc. is a _____. a. small and medium-sized enterprise b. micro enterprise c. large enterprise d. minute enterprise Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm ANSWER: a 17. Lisa Roark is the CEO of an e-commerce company located and operating only in the U.S. Recently, the company launched a new inexpensive data storage device which can also transfer data to another data storage device without an external accessory. This product fetched high revenue for the company. Lisa, therefore, decided to expand the business abroad through foreign direct investment (FDI). This scenario exemplifies _____. a. indirect export b. sporadic exporting c. corporate social entrepreneurship d. international entrepreneurship ANSWER: d 18. Which of the following statements is true of entrepreneurship? a. Size and age are the defining characteristics of entrepreneurship. b. It establishes rules that are strictly followed in minimizing the chances of risk. c. It is often associated with small and medium-sized enterprises. d. Large firms are usually associated with entrepreneurship. ANSWER: c 19. Small and medium enterprises (SMEs) are important because: a. they create approximately 50 percent of total value added in the world. b. they increase employment rate in government sectors. c. they account for 50 percent of the number of firms in the world. d. they revive old management practices. ANSWER: a 20. According to an institution-based view, which of the following statements is true of entrepreneurship? a. Development of entrepreneurship is equal around the world. b. The less entrepreneur-friendly the formal institutional requirements are, the more flourishing entrepreneurship is. c. Informal institutions such as cultural values and norms rarely affect entrepreneurship. d. Development of entrepreneurship significantly depends on formal institutions. ANSWER: d 21. Which of the following steps should be taken by governments to be entrepreneur-friendly? a. Governments should adopt collectivist attitudes. b. Governments should impose fewer procedures for entrepreneurs. c. Governments should increase processing time to ensure proper background check of entrepreneurs is done. d. Governments should refrain from approving entrepreneurial firms that involve high risks. ANSWER: b 22. Which of the following is true of an individualistic and low uncertainty-avoidance society? a. It gives high importance to the society and has a low tolerance toward risk. b. It follows a strict, rigid formal structure. c. It tends to foster more entrepreneurs. Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm d. It makes decisions in groups and avoids circumstances leading to change. ANSWER: c 23. Duador is a country that displays a high risk-taking behavior and has tolerance toward any changes. In this case, which of the following statements is true of Duador? a. It is a high uncertainty-avoidance society. b. It is a low uncertainty-avoidance society. c. It is highly collectivist in attitude. d. It is not entrepreneur-friendly. ANSWER: b 24. Which of the following countries is a collectivistic and high uncertainty-avoidance society? a. Japan b. Russia c. The United States of America d. The United Kingdom ANSWER: a 25. Destination Avenue, a travel agency, has recently introduced free Wi-Fi and laptop charging facilities in its buses. In this case, which of the following aspects of the VRIO (value, rarity, imitability, and organizational) framework is the agency focusing on? a. Imitability b. Rarity c. Value d. Organization ANSWER: c 26. According to the resource-based view, which of the following is an important aspect required for entrepreneurship? a. Rarity b. Charity c. Government regulations d. Resistance to risks ANSWER: a 27. Tobias intends to start an automobile manufacturing company. According to the VRIO (value, rarity, imitability, and organizational) framework, which of the following ideas will lead to a successful entrepreneurship? a. He can manufacture automobiles that are unique and custom-built according to his customers’ specifications. b. He can start a showroom where the display range can include all the automobiles available in the locality. c. He can manufacture automobiles that are easy to disassemble. d. He can market his automobiles in locations where only a few people own cars. ANSWER: a 28. Popsicool, a small popsicle company, has recently introduced healthy popsicles made from vegetable juice, because no one else in the industry is offering this. In this case, which of the following aspects of the VRIO framework is the agency focusing on? Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm a. Imitability b. Rarity c. Value d. Organization ANSWER: b 29. Sara is the CEO of a small entrepreneurial firm that creates medical software. She decided early on to create a company culture that supports innovation among her staff. Every month she holds a meeting to discuss new innovation ideas. Why is this a smart move as a CEO? a. The company’s profits probably increased immediately. b. This increases the opportunities for franchising. c. There is a positive relationship between innovation and profitability. d. It allows for short-term, non-sustainable gains. ANSWER: c 30. Which of the following is the reason that the practice of microfinancing developed? a. Began to serve SMEs in the developed world who were unable to secure financing from banks. b. Started in Bangladesh to help entrepreneurs start small businesses that would ultimately lift them out of poverty. c. Began in the poorer sections of Detroit to support the small businesses of working mothers. d. MNEs developed this practice to finance innovators within their firms. ANSWER: b 31. Bristo Corp. provides software support to all its customers. In an internal survey, it was found that only 60 percent of its employees have been working full time. Hence, instead of hiring new employees to provide software support, the company has decided to train existing employees to ensure that its resources are fully utilized. In this case, Bristo’s entrepreneurial focus is on _____. a. innovation b. growth c. financing d. recruiting ANSWER: b 32. Simon is a product engineer at Worldly Solutions Inc. Even though he is well paid, he is frustrated because his new ideas and product designs are rejected as "non-feasible" by the members of the top management. So, he intends to start his own firm where his ideas will take shape. In this scenario, Worldly Solutions Inc. does not possess the characteristic of _____ to become an entrepreneurial firm. a. financing b. innovation c. growth d. inimitability ANSWER: b 33. Which of the following is true of innovators at entrepreneurial firms? a. They have limited ability to personally profit from their innovation. Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm b. They are able to reap the financial gains associated with innovation. c. They take fewer risks than managers at large firms. d. They are resistant to change and have a high amount of uncertainty avoidance. ANSWER: b 34. Which of the following statements is true of financing an entrepreneurial firm? a. Microfinance involves lending sums ranging from $600-$1000 to start medium-scale businesses. b. Countries that have low venture capital (VC) investment lack sources of informal investment. c. Innovative entrepreneurship is usually not financed through formal investment. d. Strategic investors demand collateral in return for financing the firm. ANSWER: d 35. _____ has the lowest level of venture capital (VC) investment as a percentage of gross domestic product (GDP). a. Belgium b. China c. South Africa d. Sweden ANSWER: b 36. Informal investment is mostly made by _____. a. family and friends b. angel investors c. venture capitalists d. banks and financial institutions ANSWER: a 37. _____ has the lowest level of informal investment. a. Belgium b. Japan c. China d. Brazil ANSWER: d 38. _____ involves lending small sums ($50-$300) used to start small businesses with the intention of ultimately lifting the entrepreneurs out of poverty. a. Microfinance b. Venture capital c. Foreign direct investment (FDI) d. Foreign portfolio investment (FPI) ANSWER: a 39. Patrick was a manager at a software development firm. He resigned from the company and started a firm abroad. Patrick’s new company is an example of _____. a. born global firms Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm b. joint ventures c. limited partnership firms d. acquisitions ANSWER: a 40. _____ is the strategy for entering foreign market that involves the sale of products made by entrepreneurial firms in their home country to customers in other countries. a. Foreign direct investment b. Indirect export c. Direct export d. Foreign portfolio investment ANSWER: c 41. In the context of international strategies for entering foreign markets, _____ refers to the sales prompted by unsolicited inquiries. a. licensing b. franchising c. direct exporting d. sporadic exporting ANSWER: d 42. A _____ refers to a financial contract that states that the importer’s bank will pay a specific sum of money to the exporter upon delivery of the merchandise. a. letter of credit b. petition c. bill of lading d. letter of intent ANSWER: a 43. _____ refers to Firm A’s agreement to give Firm B the rights to use A’s proprietary technology or trademark for a royalty fee paid to A by B. a. Direct exporting b. Licensing c. Passive exporting d. Importing ANSWER: b 44. _____ refers to Firm A’s agreement to give Firm B the rights to use A’s proprietary assets for a royalty fee paid to A by B. This is typically done in service industries. a. Exporting b. Passive exporting c. Franchising d. Importing ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm 45. Which of the following statements is true of franchisors? a. Franchisors can operate only in their home country and cannot enter international markets. b. Franchisors usually risk a huge capital when expanding abroad. c. Franchisors are often from manufacturing industries. d. Franchisors may suffer a loss of control over how their technology and brand names are used. ANSWER: d 46. In the context of entry modes, _____ involves strategic alliances with foreign partners (such as joint ventures), foreign acquisitions, and/or greenfield wholly owned subsidiaries. a. foreign portfolio investment b. indirect export c. foreign direct investment d. franchising ANSWER: c 47. In the context of entry modes, which of the following statements is true of the stage model? a. It posits that firms move from foreign direct investment to licensing/franchising and finally to direct export. b. It posits that small and medium-sized enterprises (SMEs) that do eventually internationalize will do so through a slow process. c. It is a model followed by all born global firms. d. It is a model that helps small and medium-sized enterprises (SMEs) decide the most appropriate mode of entry for internationalization. ANSWER: b 48. Which of the following is a strategy for entrepreneurial small and medium-sized enterprises (SMEs) to internationalize without leaving their home country? a. Becoming a licensee of a home brand in a foreign country b. Engaging in foreign direct investment c. Becoming suppliers for foreign firms d. Exporting directly ANSWER: c 49. When would an entrepreneurial firm decide to become an alliance partner of a foreign direct investor? a. When indirect exports exceed direct exports. b. When they may not be able to successfully defend their market positions. c. When innovation surpasses profits. d. After rapid internalization and successfully going abroad. ANSWER: b 50. How should entrepreneurs help legitimize entrepreneurship around the globe? a. Rely on tangible resources. b. Remember that boldness and drive can hurt legitimacy. c. Cultivate strong informal norms granting legitimacy to entrepreneurs. d. Avoid taking on internships and offering seed money for new ventures. Copyright Cengage Learning. Powered by Cognero.

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ch09: Growing & Internationalizing the Entrepreneurial Firm ANSWER: c 51. Analyze how formal and informal institutions affect entrepreneurship. ANSWER: Although entrepreneurship is thriving around the globe in general, its development is unequal. Whether entrepreneurship is facilitated or retarded significantly depends on formal institutions governing how entrepreneurs start up new firms. Using the relatively straightforward task of connecting electricity to a newly built commercial building, the World Bank finds that in general, governments in developed economies impose fewer procedures (an average of 4.6 procedures for OECD high-income countries) and a lower total cost (free in Japan and 5.1 percent of per capita gross domestic product (GDP) in Germany). On the other hand, entrepreneurs have to put up with harsher hurdles in poor countries. As a class of its own, Burundi imposes a total cost of 430 times of its per capita GDP for entrepreneurs to obtain electricity. Sierra Leone leads the world in requiring entrepreneurs to spend 441 days to obtain electricity. In addition to formal institutions, informal institutions such as cultural values and norms also affect entrepreneurship. For example, because entrepreneurs necessarily take more risk, individualistic and low uncertainty-avoidance societies tend to foster relatively more entrepreneurs, whereas collectivistic and high uncertainty-avoidance societies may result in relatively fewer entrepreneurs. Overall, the institution-based view suggests that both formal and informal institutions matter. 52. Explain the VRIO (value, rarity, imitability, and organizational) framework of entrepreneurship. ANSWER: Like any other firm, an entrepreneurial firm must take the VRIO framework into account as it considers how to leverage its resources. First, entrepreneurial resources must create value. For example, by offering cheap fares, convenient schedules, and Wi-Fi and power port on every seat, Megabus offers superb value to travelers for mediumhaul trips that are too far for a leisurely drive but too close to justify the expenses and the increasing hassle to fly. Second, resources must be rare. The best-performing entrepreneurs tend to have the rarest knowledge and insights about business opportunities. Math geniuses are few and far between, but the ability to turn a passion for math into profit is truly rare. Google’s two founders are such rare geniuses. Third, resources must be inimitable. For example, in the ocean of e-commerce firms, the ability to do the "dirtiest job on the Internet" as an online moderator is very hard to imitate. Fourth, entrepreneurial resources must be organizationally embedded. For example, as long as there have been wars, there have been mercenaries ready to fight on behalf of the highest bidder. But only in modern times have private military companies (PMCs) become a global industry. 53. Analyze the three major characteristics associated with a growing entrepreneurial firm. ANSWER: Three major characteristics associated with a growing entrepreneurial firm are growth, innovation, and financing. Growth: For many entrepreneurs the excitement associated with growing new firms is the very thing that attracts them in the first place. Recall from the resource-based view that a firm can be conceptualized as a bundle of resources and capabilities. The growth of an entrepreneurial firm can thus be viewed as an attempt to more fully use currently underutilized resources and capabilities. An entrepreneurial firm can leverage its (intangible) vision and drive in order to grow, even though it may be short on (tangible) resources such as financial capital. Innovation: Evidence shows a positive relationship between a high degree of innovation and superior profitability. Innovation allows for a more sustainable basis for competitive advantage. Owners, managers, and employees at entrepreneurial firms tend to be more innovative and risk taking than those at large firms. In fact, many small and medium-sized enterprises (SMEs) are founded by former employees of large firms who were frustrated by their inability to translate innovative ideas into realities at the large firms. Intel, for example, was founded by three former employees of Fairchild Semiconductor. Innovators at large firms also have limited ability to personally profit from their innovations because Copyright Cengage Learning. Powered by Cognero.

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