Chapter 2 The Entrepreneurial Mind-Set
True/False Questions
1. Entrepreneurs must often make decisions in highly uncertain environments where
there is considerable emotional investment.
Answer: True Page: 30 Difficulty: Easy
2. Demographics, ethnic origin, and marital status are examples of segmentation
variables.
Answer: True Page: 31 Difficulty: Easy
3. The pilot-in-the-plane principle focuses on exploiting external factors in order to better
predict future trends.
Answer: False Page: 33 Difficulty: Med
4. Principles of effectuation help entrepreneurs develop their cognitive adaptability.
Answer: False Page: 33 Difficulty: Easy
5. The question “What is this technology all about?” is a comprehension question.
Answer: True Page: 37 Difficulty: Easy
6. Comprehension questions are designed to stimulate entrepreneurs to think about their
own understanding.
Answer: False Page: 37 Difficulty: Med
7. An entrepreneur typically learns more from failures than from successes.
Answer: True Page: 38 Difficulty: Easy
8. The motivation for managing one’s own business is typically driven out of personal
profit.
Answer: False Page: 38 Difficulty: Med
9. Negative emotional responses interfere with individuals’ allocation of attention in the
processing of information.
Answer: True Page: 39 Difficulty: Med
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Chapter 2 The Entrepreneurial Mind-Set
10. An entrepreneur with loss-orientation would rarely talk about the business-failure with
a close friend or relative.
Answer: False Page: 39 Difficulty: Easy
11. An entrepreneur’s recovery from grief provides benefits to the society.
Answer: True Page: 41 Difficulty: Med
12. Entrepreneurial management structure is more hierarchical compared to the flat
structure of traditionally managed firms.
Answer: False Page: 41 Difficulty: Easy
13. Most traditional firms are committed to taking action on potential opportunities.
Answer: False Page: 44 Difficulty: Easy
14. Entrepreneurially managed firms do not easily reverse their investment even if they
receive unsatisfactory feedback.
Answer: False Page: 44 Difficulty: Easy
15. A traditionally managed firm pursues an opportunity after considerable data analysis.
Answer: True Page: 44 Difficulty: Easy
16. Compared to a traditionally managed firm, an entrepreneurially managed firm often
has a larger initial investment when pursuing a new opportunity
Answer: False Page: 44 Difficulty: Easy
17. A traditional firm prefers to remain in a line of business for a considerably longer
period of time than an entrepreneurial firm.
Answer: True Page: 44 Difficulty: Easy
18. Compared to traditional firms, entrepreneurial firms are more concerned about
ownership of resources.
Answer: False Page: 45 Difficulty: Easy
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Hisrich, Entrepreneurship, Seventh Edition
Chapter 2 The Entrepreneurial Mind-Set
19. Traditional firms focus more on efficiency, than acting on changes in the external
environment.
Answer: True Page: 45 Difficulty: Med
20. In an entrepreneurial firm, promotion is a reward and provides the manager with even
more resources and therefore further scope for rewards.
Answer: False Page: 45 Difficulty: Med
21. A typical entrepreneurial firm prefers to grow at a controlled rate.
Answer: False Page: 45 Difficulty: Med
22. Traditional firms believe that fast growth can endanger the jobs and power of top
management.
Answer: True Page: 45 Difficulty: Med
23. Traditional firms have an informal hierarchy with flexible and overlapping roles and
responsibilities.
Answer: False Page: 45 Difficulty: Easy
24. New lines of business and opportunities are the focus of traditionally managed firms.
Answer: False Page: 45 Difficulty: Easy
25. Traditionally managed firms begin evaluating a new opportunity by assessment of the
resources it controls.
Answer: True Page: 46 Difficulty: Med
26. Due to the size of investment, the scope of opportunities discovered and generated by
traditional firms is more than that of entrepreneurial firms.
Answer: False Page: 46 Difficulty: Med
27. Most firms today are purely entrepreneurial in all their aspects.
Answer: False Page: 45 Difficulty: Easy
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Chapter 2 The Entrepreneurial Mind-Set
28. While effectuating, entrepreneurs think through a problem in a way that starts with a
desired outcome and focuses on the means to generate that outcome.
Answer: False Page: 30 Difficulty: Easy
Multiple Choice Questions
29. Which of the following is in accordance with the process of causation?
A) Starts with a desired outcome and focuses on the means to generate the outcome.
B) Focuses on starting with available resources and selecting one among the possible
outcomes.
C) States that the approach to a problem is means-driven.
D) Focuses on making sense of opportunities in context of changing goals.
Answer: A Page: 30 Difficulty: Hard
30. A ________ consists of all potential customers sharing a particular need/want who are
willing and able to engage in exchange to satisfy the need/want.
A) consumer base
B) target audience
C) market
D) distribution channel
Answer: C Page: 30 Difficulty: Easy
31. Which is a viable and descriptively valid alternative for the STP process?
A) Demographic analysis
B) Cognitive adaptability
C) Causation
D) Effectuation
Answer: D Page: 31 Difficulty: Med
32. Which of the following is true of the patchwork-quilt principle?
A) Emphasis is on creating something new with the available means.
B) Entrepreneurs can venture into a financially uncertain environment with a known
maximum loss.
C) Involves negotiating with every genuinely interested stakeholder.
D) Involves relying on and working with people to shape the organization’s future.
Answer: A Page: 32 Difficulty: Easy
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Hisrich, Entrepreneurship, Seventh Edition
Chapter 2 The Entrepreneurial Mind-Set
33. Which principle advocates leveraging surprises for benefits?
A) Pilot-in-the-plane principle
B) Bird-in-hand principle
C) Lemonade principle
D) Affordable loss principle
Answer: C Page: 33 Difficulty: Easy
34. An entrepreneur questioning the meaning of a key technological concept would fall
under which of these categories?
A) Strategic questions
B) Connection tasks
C) Reflection tasks
D) Comprehension questions
Answer: D Page: 37 Difficulty: Med
35. An entrepreneur asks if there is a better way to implement a strategy. Identify the
category of this question.
A) Strategic questions
B) Connection tasks
C) Reflection tasks
D) Comprehension questions
Answer: C Page: 37 Difficulty: Med
36. What is the most probable motivation for managing one’s own company?
A) Personal profit
B) Loyalty to a product, market and customers
C) Stability of family’s future
D) Respectability in holding a position of authority
Answer: B Page: 38 Difficulty: Hard
37. Which negative emotional response does a person feel from the loss of something
important?
A) Fear
B) Guilt of failure
C) Grief
D) Anger
Answer: C Page: 38 Difficulty: Easy
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Chapter 2 The Entrepreneurial Mind-Set
38. When would an entrepreneur be pronounced to have recovered from the grief of a lost
business?
A) On the availability of equally challenging entrepreneurial opportunities.
B) Upon a simultaneous engagement in an analysis of the failed business.
C) On having evaluated and absorbed the lessons learnt from the failed business.
D) Thoughts about the events surrounding, and leading up to the loss of the business,
no longer generate a negative emotional response.
Answer: D Page: 39 Difficulty: Med
39. In the loss-orientation process of grief recovery, when are painful memories likely to
dominate most?
A) In the early phase of grief.
B) In the medial stage of grief.
C) In the later stage of grief.
D) Each time a related negative thought comes to mind.
Answer: A Page: 39 Difficulty: Easy
40. Why is loss-orientation physically and mentally exhausting?
A) Since it involves psychological counseling.
B) Since it involves confrontation.
C) Since it advocates change of lifestyle.
D) Since it takes a long time to recover from grief.
Answer: B Page: 40 Difficulty: Med
41. Why does restoration-orientation have adverse effects on an individual’s health?
A) Since it involves regular physical exertion via exercise.
B) Since it prescribes physical diversions like a hobby.
C) Since it involves suppression by mental effort.
D) Since it involves mental catharsis to bring out the grief.
Answer: C Page: 40 Difficulty: Med
42. Which of the following is most effective in grief-recovery?
A) Restoration-orientation
B) Loss-orientation
C) Dual process
D) Grief recovery process
Answer: C Page: 40 Difficulty: Easy
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Chapter 2 The Entrepreneurial Mind-Set
43. Entrepreneurial management differs from traditional management in all of the
following ways, except:
A) control of resources.
B) reward philosophy.
C) level of control by stakeholders.
D) commitment to opportunity.
Answer: C Page: 41 Difficulty: Med
44. What is referred to by strategic orientation?
A) Factors that are inputs into the formulation of the firm’s strategy.
B) Company policies that define the strategic approach towards competition.
C) Founder-entrepreneur’s long-term strategic goal for the company.
D) Firm’s business is oriented in the light of a global or local market.
Answer: A Page: 43 Difficulty: Med
45. In the light of commitment towards opportunities, traditional firms, unlike
entrepreneurially managed firms, place considerable emphasis on:
A) investment opportunities.
B) resources deployed.
C) information and its analysis.
D) strategic orientation.
Answer: C Page: 44 Difficulty: Hard
46. With reference to management structure, which following option is an example of an
internal network for an entrepreneurially managed firm?
A) Buyers
B) Informal communication channels at work
C) Suppliers
D) Financial institutions
Answer: B Page: 45 Difficulty: Easy
47. The management structure of an entrepreneurially managed firm is:
A) driven by perception of opportunity.
B) primarily bureaucratic.
C) organic.
D) fluid.
Answer: C Page: 45 Difficulty: Easy
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Chapter 2 The Entrepreneurial Mind-Set
48. In a traditionally managed firm, management and employees are rewarded by:
A) the amount of resources they control.
B) their productive contribution.
C) their technical expertise.
D) their hierarchical order of preference.
Answer: A Page: 45 Difficulty: Easy
49. In an entrepreneurially managed firm, employees are rewarded by:
A) the economy of their resource consumption.
B) the evaluation of their growth potential in the firm.
C) their contribution towards discovery/generation and exploitation of opportunities
D) by their position in the formalized hierarchical management structure.
Answer: C Page: 45 Difficulty: Easy
50. Why do traditionally managed firms prefer to grow at a slow and a steady pace?
A) Because it is more manageable, and resources are not at risk.
B) Because typically shareholders trust a stable company.
C) Because their strategic orientation does not allow them to grow fast.
D) Because they are averse to taking risks by diversifying their business.
Answer: A Page: 45 Difficulty: Med
51. In terms of culture, entrepreneurially managed firms encourage their employees to
generate creative output, because:
A) their reward structure is directly influenced by their creativity.
B) the employees function to their best when they are in a creative mode.
C) the work-culture stays dynamic and fresh if employees are creative.
D) their ideas are often the source of new opportunities.
Answer: D Page: 46 Difficulty: Easy
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