Strategic Management CH 10, 13

Pat and Terry are top-level managers at Descitt Corp. When LVG Enterprises made an offer to purchase Descitt, Pat and Terry felt that their jobs were in jeopardy. Now that the Descitt board has rejected the offer, Pat and Terry view this as an expression of faith in their leadership and can be confident that their positions at the firm are secure.

False

Ray and Gina own shares of stock in a number of different companies. None of their holdings are very large. Because they make their own investment decisions, they are not as dependent on the board of directors to represent their interests as the large-block shareholders are.

False

Research evidence suggests that ownership concentration is associated with lower levels of firm diversification, which conforms to the interests of stockholders.

False

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions related to consumer protection, systemic risk oversight, and capital requirements for banks, but not for executive compensation.

False

The entrepreneurial mind-set is found primarily among managerial and scientific employees.

False

The essence of entrepreneurship is to capture most of the existing markets from less aggressive and innovative competitors.

False

The increased use of the market for corporate control has decreased the sophistication and variety of managerial defense tactics that are used in takeovers.

False

The separation of ownership and control is the most effective means used by firms to prevent managerial opportunism.

False

The three internal corporate governance mechanisms are ownership concentration, board of directors, and the market for corporate control.

False

The way that U.S. corporate boards of directors are presently structured, they have little influence on the unethical behavior of top management.

False

Well-designed stock option-based compensation plans should have the option strike prices substantially lower than the current stock prices.

False

When the option strike prices in an executive stock option-based compensation plan have been lowered, it is usually a defense to a hostile takeover.

False

While both incremental and novel innovations can create value, incremental innovations have the potential to contribute more significantly to a firm's efforts to earn above-average returns.

False

While smaller firms must use cooperative strategies as a means of producing innovations, larger firms with large R&D units such as P&G and 3M can produce most if not all innovations internally.

False

AgroPharm is searching for a top-level executive. AgroPharm has marketed its products only to U.S. farmers and agribusinesses in the past. Now, the company plans to expand operations to Mexico and Central America in the next two years. To maximize the chances of success, it is critical that the new executive:

have international experience.

The New York Stock Exchange requires that the audit committee be:

headed by outside directors.

If the firm's current employees are well-trained in their jobs, but also have the ability to understand and apply new knowledge, these employees have:

high absorptive capacity to learn.

A virtually exclusive reliance on financial controls may occur when outsider-dominated boards exist. This may lead

high executive turnover.

Managers in the United States receive __________ compensation than managers in the rest of the world.

higher

In the implementation of internal innovations, formal and informal processes are best supported through __________ organizational structures.

horizontal

New entrepreneurial firms are better than larger established firms at:

identifying entrepreneurial opportunities

Products developed through __________ are often offered at lower prices without as many features as products developed through __________.

imitation; innovation

The three types of innovative activity include all of the following EXCEPT:

implementation

The top management team at Sierra Infusion is concerned about the declining performance of firms in their industry. The team members are becoming concerned about the security of their jobs at Sierra Infusion. At a meeting over dinner, the top management team agrees to go to the board of directors with a proposal for:

increased diversification of Sierra Infusion.

3M's Cubitron II, described as "an industrial abrasive that cuts faster, lasts longer, sharpens itself, and requires less elbow grease than any other abrasive on the market," is an example of a(n):

incremental innovation.

Panera Bread has innovated to improve the quality of its distribution system, to improve the quality of its bread dough, and to introduce new menu items. These are examples of:

incremental innovation.

A successful __________ innovation will be less risky but less profitable than a successful __________ innovation

incremental; novel

A major barrier to the use of cross-functional teams is:

independent frames of reference of team members.

Generally, a board member who is a source of information about a firm's day-to-day activities is classified as a(n) __________ director.

inside

The market for corporate control serves as a means of governance when:

internal controls have failed.

WayWard Products has a deliberate strategy to encourage internal innovations. It has established processes to support autonomous strategic behavior as well as induced strategic behavior. WayWard Products is involved in:

internal corporate venturing.

Blixin Concrete Products, an established firm, is seeking a technologically advanced partner for a strategic alliance. If the potential partner is a new entrepreneurial venture, the main benefit that Blixin Concrete can offer is probably:

investment capital.

Regarding partnering in cooperative alliances, entrepreneurial new companies may seek __________, while more established companies may need __________.

investment capital; new technological knowledge

Innovations that involve significant technological breakthroughs and create new knowledge:

involve substantial uncertainty and risk.

One of the distinguishing differences between the two sources of internal corporate venturing (autonomous strategic behavior and induced strategic behavior) is whether the innovation process:

is encouraged through a bottom-up or top-down process

GreenBox, a company that recycles paper products to make cardboard cartons, has introduced a new product that resists damage by moisture. GreenBox can expect that:

its investors will react positively to the introduction of the new product because of the potential for higher returns.

The market for corporate control may not be as efficient as previously thought as recent findings suggest that those firms targeted for takeover by active corporate raiders are:

often performing above their industry averages.

The main risk in a strategic alliance is that:

one partner will take the other partner's knowledge and use it to enhance its own competitive abilities.

Entrepreneurship is the process by which individuals or groups identify and pursue __________ without being immediately constrained by the __________ they currently control.

opportunities; resources

The competition for resources among those representing different organizational functions within a firm often leads to:

organizational politics

Research suggests that boards of directors perform better if:

outside directors own significant equity in the organization.

Through the work of cross-functional teams, product development stages are grouped into __________ processes.

parallel

Roland has developed and patented an inexpensive and organic way to enhance the fertility of clay soils without the addition of chemical fertilizers. Established agricultural chemical companies have rejected his proposals. After six months of promoting his invention during his time off from his regular job, Roland has decided to set his dream aside. Roland lacks a key characteristic of successful entrepreneurs, which is:

passion for his invention.

Executive compensation is a governance mechanism that seeks to align managers' and owners' interests through all of the following EXCEPT:

penalties for inadequate firm performance.

If the market for corporate control were efficient as a governance device, then only __________ would be targets for takeovers.

poorly performing firms

The level of entrepreneurial activity in a nation is __________ the nation's level of economic productivity.

positively related to

German executives are not dedicated to the maximization of shareholder value to the degree that is the case for executives in the United Kingdom and the United States largely because:

private shareholders and large institutional investors rarely have large ownership positions in firms.

The idea that it is necessary to sell the ideas to others in the organization so that innovations will be commercialized is the rationale behind the use of:

product champions.

Because activist pension funds are __________ in nature, they tend to take action when __________.

reactive; a firm is underperforming

A major conflict of interest between top executives and owners is that top executives wish to diversify the firm in order to __________, whereas owners wish to diversify the firm in order to __________.

reduce their employment risk; increase the company's value

One means that is considered to improve the effectiveness of outside directors is:

requiring outside directors to own significant equity stakes in the firm.

All of the following are areas covered by the Dodd-Frank Wall Street Reform and Consumer Protection Act EXCEPT:

retirement accounts.

Compared to managers, shareholders prefer:

riskier strategies with more focused diversification for the firm.

The longer the focus of managerial incentive compensation, the greater the __________ top-level managers.

risks borne by

The board of directors of CyberScope, Inc., is designing a stock option plan for its CEO that will motivate the CEO to increase the market value of the firm. Consequently, the board is:

setting the option strike price substantially higher than the current stock price.

The firm's culture promotes unity of purpose for cross-functional work teams through:

shared values.

In the United States, a firm's key stakeholder(s) is(are) the:

shareholders.

Internal corporate venturing does NOT involve

strategic alliances.

The risks of international entrepreneurship include all of the following EXCEPT:

strong "buy-domestic" programs.

A Japanese keiretsu is a:

system of cross-shareholding among firms.

__________ involves internally developed incremental and novel innovations that result from deliberate efforts.

Internal corporate venturing

James Abercrombie has a thriving consulting firm specializing in training boards of directors in decision-making skills. Mr. Abercrombie has had striking success in reducing conflict and hostility among directors and allowing boards to develop more cohesiveness. Mr. Abercrombie is considering expanding his consulting practice overseas. Which of the following statements is most likely to be true?

Japanese firms will have little interest in Mr. Abercrombie's specialty because these skills are already practiced at a high level.

Research suggests that __________ is needed to encourage entrepreneurial behavior. Two surveys were conducted in 2017 to identify the world's 10 most entrepreneurial or innovative countries. Why weren't all of the same countries on both lists?

Knowing the criteria to use in this identification is difficult.

KorniCo. is considering possible strategies to defend against a hostile takeover. They have narrowed it down to four options. Because of pressure from shareholders, they need to adopt a strategy that is shown to have a positive effect on shareholder wealth. Based on that criterion, which of the following should they choose?

Litigation

Which of the following is NOT an internal governance mechanism?

Market for corporate control

Which of the following is one of the barriers to effectiveness when using cross-functional teams to integrate organizational functions?

Organizational politics

Which of the following statements about corporate governance in China is false?

Private firms seek to establish political ties with the government to increase market value and avoid potential conflict between the principals.

Corporate governance primarily revolves around the relationship between which of the following two parties?

Shareholders and managers

Recent changes to Japan's corporate governance structure include which of the following?

The role of banks in monitoring managerial behavior is less significant.

Why do entrepreneurial ventures tend to produce more radical innovations than larger, more established firms do?

They have more strategic flexibility.

. Isidore Security Services is a national provider of guard and security services for businesses. It has been in business for over 90 years, having been founded by one of Teddy Roosevelt's Rough Riders (Isidore O'Malley). Lately, it has been losing clients to more aggressive and innovative firms offering remote security monitoring systems instead of a guard-based approach. The board of directors of Isidore Security Services is concerned that this downward trend may threaten the existence of this venerable firm and the jobs of its employees. Which of the following statements is true?

This is an example of an established firm neglecting the opportunity-seeking aspect of strategic entrepreneurship.

For which of the following reasons have large pharmaceutical companies been forming alliances with biotechnology companies?

To develop new products and bring them to market

Why would the top-level managers at Nutzandboltz, a hardware company, decide to invest free cash flow in product lines such as clothing or toys?

To increase the level of diversification

A key risk of acquisitions is that a firm may substitute an ability to buy innovations for an ability to produce innovations internally.

True

A society's cultural characteristics influence a nation's rate of entrepreneurship and its related practices.

True

Acquisitions are a means of extending the company's product line and increasing revenues. The capital market values growth. Therefore, some firms make acquisitions to improve their standing in the capital markets.

True

Agency costs include incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals.

True

Amazon's Dash button allows customers to reorder household essentials at the click of a button. This is an example of a radical, or novel, innovation that provided significant technological changes.

True

An agency relationship exists when one party delegates decision-making responsibility to a second party for compensation.

True

An entrepreneurial mind-set, cross-functional product development teams, and shared values/leadership are ways that firms implement internal innovations.

True

An innovation developed through autonomous strategic behavior will probably take the firm into new markets not addressed by its current strategy.

True

An organization engaging in strategic entrepreneurship focuses on identifying opportunities that it can exploit through innovations.

True

As a process, entrepreneurship results in the "creative destruction" of existing products (goods or services) or methods of producing them and replaces them with new products and production methods.

True

As globalization grows, adequate corporate governance is becoming an important requirement for doing business with foreign firms and in foreign countries.

True

Attitudes toward corporate governance in Japan are affected by the concepts of obligation, family, and consensus.

True

Awareness by top managers of the existence of external investors in the form of individuals (e.g., Carl Icahn) and groups (e.g., hedge funds) often positively influences them to align their interests with the firm's shareholders.

True

Because of recent ineffective performance, boards of directors are experiencing increasing pressure from shareholders, lawmakers, and regulators to be more forceful in preventing managers from acting in their own interest.

True

Because top management decisions are usually complex and nonroutine, direct supervision (even by the firm's board of directors) is likely to be ineffective as a means of judging the quality of their decisions.

True

CEO duality exists when a single individual is both the CEO and the chair of the board.

True

Corporate governance involves oversight in areas where owners, managers, and members of boards of directors may have conflicts of interest.

True

Corporate governance is a means to establish and maintain harmony between parties (the firm's owners and its top- level managers) whose interests may conflict.

True

Corporate governance is the set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations.

True

Corporate governance mechanisms are designed to ensure that top-level managers make strategic decisions that best serve the interests of all stakeholders.

True

Critics advocate reforms to ensure that independent outside directors represent a significant majority of the total membership of the board. But outsider-dominated boards may emphasize the use of financial as opposed to strategic controls. The risk of reliance on financial controls is that they may encourage managers to make decisions to maximize their interests and reduce their employment risk.

True

Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market.

True

Entrepreneurial opportunities exist because of competitive imperfections in markets and among the factors of production used to produce them or because they were independently developed by entrepreneurs.

True

Entrepreneurial ventures often produce more breakthrough innovations than do larger, more established organizations.

True

Entrepreneurship is the economic engine driving many nations' economies in the global competitive landscape.

True

Ethically responsible companies design and use governance mechanisms that will at least minimally satisfy stakeholders' interests.

True

Failures of corporate internal controls and inadequate internal control systems allowed unethical executives at such companies as Enron and WorldCom to act in their own self-interest.

True

Firms in China that have higher state ownership have been shown to have more volatility and lower market value, in part because government-mandated social goals take precedence over shareholder returns.

True

FutureTech used an induced approach to innovation to create open innovation because it wants to be the firm whose products become the source of industry standards.

True

Hedge funds, as part of the market for corporate control, identify a firm that is underperforming and then invest in it with the goal of improving that firm's performance.

True

If a stakeholder is dissatisfied with a firm, it will withdraw its support and give it to another firm.

True

If the company's workers have scant existing knowledge, their "absorptive capacity" to learn new knowledge will be limited.

True

In a large number of family-owned firms, ownership and managerial control are not separated.

True

In modern corporations—especially those in the United States and the United Kingdom—a primary objective of corporate governance is to ensure that the interests of top-level managers are aligned with the interests of shareholders.

True

In recent years, the number of individuals who are large-block shareholders has declined and been replaced by institutional owners.

True

In the United States, the primary goal of a firm is to maximize profits to provide a financial gain to shareholders.

True

In the modern large U.S. corporation, the ownership and managerial control of the firm are separated.

True

Innovation is the means by which the entrepreneur creates wealth.

True

Joseph Schumpeter argued that firms engage in three types of innovative activities: imitation, invention, and innovation.

True

KorniCo is determined to defend against a hostile takeover, no matter what. If the company wants to choose the most effective defense it should adopt the poison pill strategy, which will make its stock less attractive to the potential acquirer.

True

Large German firms must include employees, union members, and shareholders in the formal governance structure.

True

Larger, established firms, increasingly those competing globally, use their R&D labs to create disruptive technologies and products.

True

Long-term incentives facilitate a board of directors' pay-related decisions designed to avoid potential agency problems by linking managerial compensation to the wealth of common shareholders.

True

Most believe that the the Sarbanes-Oxley Act in 2002 has had positive results in terms of protecting the interests of shareholders as well as other stakeholders.

True

Most innovations are incremental, not novel.

True

One of the changes to enhance the effectiveness of the board of directors is the creation of a "lead director" role that has strong powers with regard to the board agenda and oversight of non-management board member activities.

True

Ownership concentration is defined by the number of large-block shareholders and the total percentage of the firm's shares they own.

True

Ownership of many modern corporations is now concentrated in the hands of institutional investors rather than individual stockholders.

True

Political activity that is centered on the allocation of resources to the different functions may limit the effective use of cross-functional teams.

True

Recent global emphasis on corporate governance stems mainly from the apparent failure of corporate governance mechanisms to adequately monitor and control top-level managers' decisions.

True

Research has shown that internationally diversified firms are generally more innovative.

True

Research suggests that institutional activism may not have a strong direct effect on firm performance, but it may indirectly influence a targeted firm's strategic decisions, including those concerned with social issues.

True

Rosalie has become totally preoccupied with her idea for creating a business leasing horses to riders on the same principle as time-shares on condominiums. Rosalie is researching the legal, financial, and insurance aspects of her idea and is preparing a prospectus to take to banks to ask for a business loan. Rosalie's significant other is complaining that she "sleeps, eats, and drinks" this concept. Rosalie has the entrepreneurial characteristic of passion.

True

Scandals at companies such as Enron, WorldCom, and HealthSouth illustrate the negative effects of poor ethical behavior on a firm's efforts to satisfy stakeholders.

True

Severance packages are generally opposed, partly because they have a low level of success as a defense strategy. However, those who want to encourage top-level managers to accept a takeover bid that will best serve shareholders' interest would tend to favor this option.

True

Stock option repricing, where the strike price value of the option has been lowered from its original position, sometimes happens when firm performance is poor.

True

The Dodd-Frank Wall Street Reform and Consumer Protection Act is the most sweeping set of financial and regulatory reforms in the United States since the Great Depression.

True

The market for corporate control is composed of individuals and firms that buy ownership positions in or purchase all of potentially undervalued corporations typically for the purpose of forming new divisions in established companies or merging two previously separate firms.

True

The market for corporate control may not be as efficient as a governance device as theory suggests because takeover targets are not always low performers with weak governance.

True

The primary role of the board of directors is to monitor and control top-level executives to protect owners' interests.

True

The separation of the positions of CEO and chairperson of the board of directors reduces the power of the CEO over firm governance practices.

True

The top management of RavenCrest, Inc. has significant stock options in RavenCrest. They are therefore more likely to gain in making an agreement to be acquired, especially if they have golden parachutes.

True

The use of executive compensation as a governance mechanism is more challenging to firms implementing international strategies than those strictly operating domestically.

True

Xion Industries is a private firm, but it experiences both direct and indirect control from the government to influence the strategies it uses. In addition, it finds it advantageous to maintain political ties with the government in order to gain access to resources. Of the United States, Japan, China, and Germany, it is most likely that Xion is based in China.

True

Usually, large-block shareholders are considered to be those shareholders with at least __________ percent of the firm's stock.

5

PracticalSolutions is a small firm providing employee assistance programs for companies with troubled employees. PracticalSolutions frequently partners with other consulting firms to provide creative solutions for companies with personnel problems. This history of partnering exemplifies:

alignment of complementary assets.

Value creation through internal innovation originates with:

an entrepreneurial mind-set. b. cross-product development t

All of the following are consequences of the Sarbanes-Oxley Act EXCEPT:

an increased number of IPOs (initial public offerings)

Simon Leagreet, the chairperson and CEO of L-EVA Industries, Inc., has long been the major power at L-EVA. A majority of the directors are concerned that, while Mr. Leagreet has been responsible for the firm's earning aboveaverage returns, he has been displaying a tendency toward personal extravagance at the firm's expense. In order to limit Mr. Leagreet's power, the board of directors plans to:

appoint another individual as chairperson of the board of directors.

Induced strategic behavior is a process that fosters product innovations that:

are closely associated with current strategy and structure.

International Food Services (IFS) has a contract with the Marines to supply meals for its troops in Afghanistan and other foreign assignments. As a means of increasing profits, IFS has used substandard ingredients in these meals and has consistently lied about this practice during quality investigations by the Marines. Which of the following is ultimately responsible for the corporate climate that resulted in this wrongdoing?

Board of directors of IFS

The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true?

CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan.

Given the demands for greater accountability and improved performance, which of the following is NOT a voluntary change many boards of directors have initiated?

Compensating directors with stock options rather than with fixed remuneration

__________ is an important influence in Japanese corporate governance structures.

Consensus

LeederTech is facing a hostile takeover. Its focus as a defense strategy has been to ensure some continuity. It has decided to pursue a strategy that will prevent an acquirer from replacing the entire board of directors immediately, even though this tends to have very low success and a negative or negligible effect on shareholder wealth. What strategy did LeederTech select?

Corporate charter amendment

Which of the following statements about corporate governance is false?

Corporate governance is best achieved with a board of directors with strong ties to management.

Corporate governance is important to nations because:

Corporate governance is important to nations because:

__________ is one reason for the different rates of entrepreneurship among countries across the globe.

Culture

__________ exist(s) when there is a need in the market that can be satisfied by new goods or services.

Entrepreneurial opportunities

_________ are individuals, acting independently or as part of an organization, who perceive an entrepreneurial opportunity and then take risks to develop an innovation and exploit it.

Entrepreneurs

. Corporate entrepreneurship describes the opportunity seeking and exploitation of innovations in new start-up enterprises.

False

A board composed primarily of outside directors will have better insights as to the firm's intended strategic initiatives, the reasons for the initiatives, and the outcomes expected from them than will inside directors.

False

A company with a need for immediate, large returns should invest in research and development.

False

A product champion should come from outside the organization in order to ensure that the entrepreneurial vision has the objective support it needs.

False

A top-level manager's reputation is a dependable predictor of his/her future behavior.

False

AbieTech developed a new process for manufacturing its components. EfGee Manufacturing and HiGear quickly adopted a similar process. EfGee and HiGear were involved in invention.

False

Acquisitions are a low-risk approach to producing and managing innovation.

False

Amelia Smith is the sole owner of the successful restaurant chain, Amelia's Café. Ms. Smith has taken a no-interest loan from the company in order to build a luxurious seaside house for herself in Carmel, California. This constitutes a classic agency problem.

False

As a rule, shareholders prefer more product diversification than do managers because shareholders wish to reduce risk and maximize wealth.

False

Autonomous strategic behavior results in internal innovations that are highly consistent with the firm's current strategy.

False

Bill Kroganski is the owner of a moderately successful industrial services firm. His reaction to the introduction of a new process technology that could be a direct competitor to the process his firm utilizes is fear. He spends his time considering ways to isolate his firm from this new technology. Bill has characteristics consistent with the entrepreneurial mind-set.

False

Both top executives and owners of the firm wish to diversify the firm to reduce risk.

False

Cross-functional work teams are best supported by vertical organizational structures.

False

Evidence demonstrates that large established firms with well-funded R&D operations are more effective at innovation than are smaller or younger firms.

False

Executive compensation is considered an external corporate governance mechanism because it is determined in part by market forces.

False

For firms to be entrepreneurial, they must stress individualism in their employees above all other characteristics.

False

Foreign investors are playing a relatively minor role in the governance of firms in many countries.

False

Generally, board members are classified as insiders, unrelated insiders, outsiders, and unrelated outsiders.

False

In general, when governance mechanisms are strong, managers have free rein in their decisions.

False

In order to be successful, a new entrepreneurial enterprise should be sheltered from the global environment until it is firmly established in domestic markets.

False

In the United States, the members of the board of directors are a firm's key stakeholders and a company's legal owners.

False

Induced strategic behavior does not result in true innovation because it is a top-down process rather than a bottomup process.

False

Innovations can only be produced by actions and activities within the firm.

False

Institutional owners, despite their size, are usually unable to discipline ineffective top-level managers and cannot influence a firm's choice of strategies and overall strategic direction.

False

MTW MetalWorks plans to go public in the next two years. In order to be listed on the New York Stock Exchange, the firm will need to restructure its present board of directors, which is made up of a majority outside independent directors, to a board of directors that is dominated by insiders and related outsiders.

False

Managers in firms that have been subjects of hostile takeovers usually find that their value to the new firm has been enhanced because of their in-depth insider knowledge.

False

More intense application of governance mechanisms such as mandated by Sarbanes-Oxley and Dodd-Frank may cause firms to take on fewer risky projects and thus increase potential shareholder wealth.

False

More than three-fourths of the members of the PeteSys board of directors are also part of the firm's top management team. Because of their inside knowledge, this should lead to strong monitoring and control systems for managerial decisions in the firm.

False

Most large, complex firms innovate through cooperative strategies or strategic alliances, but not through internal activities.

False

Flanders Corp. is an established company with customers who understand its products' characteristics. Flanders continues to invest significantly into R&D to make small improvements to its products. What type of innovation does Flanders pursue?

Incremental

More established firms, as compared to younger ventures, tend to excel in what part of strategic entrepreneurship?

Advantage-seeking

The CEO and chairman of the board of directors of Alta Corp. is dismayed by a lack of effort and insights the members provide during board meetings. The directors are all outsiders, are experienced, and run their own successful firms. The CEO/chair genuinely seeks their greater involvement. Which of the following would you recommend?

All of these are correct.

Amos Ball, Inc., is a printing company in Iowa that has been family owned and managed for three generations. Which of the following statements is MOST likely to be true?

Amos Ball, Inc. will perform better if a family member is CEO than if an outsider is CEO.

BerEdel Group (BEG) is an international diversified firm. Marchers operates in the same industry and is also diversified, but only domestically. Which of the following would you expect?

BEG is more innovative than Marchers.

Agricultural Chemicals, Inc., was the target of a hostile takeover six months ago. The CEO and the top executives successfully fended off the takeover and are concentrating on strategies to improve the performance of the firm. Which of the following statements is MOST likely to be true?

The CEO and top executives should not consider their jobs secure.

Several members of the board of directors of American Textile Products (ATP) have proposed creating the position of lead director. Which of the following circumstances would MOST likely have initiated this proposal?

The CEO/chairperson of the board has been suspected of opportunistic behavior.

Which of the following statements about corporate governance in Germany is false?

The Vorstand is elected by the firm's employees.

Which of the following reasons would NOT explain the difficulty of determining appropriate executive compensation?

The compensation committee may not have comprehensive firm performance data.

The ownership of major blocks of stock by institutional investors has resulted in all of the following EXCEPT:

a direct effect on firm performance.

Ambrose Bierce, the CEO of DictionAry, has been paid a lump sum amounting to three years' salary because DictionAry has been bought in a hostile takeover by its main competitor. Ambrose received:

a golden parachute.

QuadroVax is investing heavily in research and development on new methods of vaccine development that would speed up the creation of vaccines for newly emerging viruses and to get these vaccines to the market rapidly. QuadroVax's shareholders can expect:

a long wait for an uncertain payoff

Corporate governance is all of the following EXCEPT:

a method for resolving conflicts among corporate employees.

A hostile takeover defense wherein the target firm makes its stock less attractive to a potential acquirer is called:

a poison pill.

Entrepreneurs tend to have all the following characteristics EXCEPT:

a preference for certainly about projects

The interests of multinational corporations' shareholders may be best served when there is:

a variety of compensation plans for executives of foreign subsidiaries

The CEO of Skyco, a publicly traded company that has been earning below-average returns, has been publicly criticized by shareholders for persuading the board of directors to give her interest-free loans, for having the company purchase and furnish a lavish apartment in Paris for her personal use on her twice-yearly trips there, and for excessive stock options. The CEO's behavior may be an indication of:

a weak board of directors.

Broadly, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to:

align financial institutions' actions with society's interests.

The separation between firm ownership and management creates a(n) __________ relationship.

agency

Historically, __________ have been at the center of the German corporate governance system.

banks

In Japan, the principal source of the active monitoring of large companies comes from:

banks.

Autonomous strategic behavior is a(n) __________ process in which product champions pursue new ideas.

bottom-up

ValTek engages in international entrepreneurship. In contrast to a company that is involved only in domestic entrepreneurship, ValTek must concentrate more on:

building the capabilities to innovate and acquiring resources to make strategic decisions.

Innovation creates a(n):

commercial product.

The use or application of entrepreneurship within an established firm is called:

corporate entrepreneurship.

According to Peter Drucker, the primary goal of innovation is to:

create wealth.

Because it replaces existing products and methods of production, entrepreneurship is a process of:

creative destruction.

As ownership of the corporation is diffused, shareholders' ability to monitor managerial decisions:

decreases.

At a recent stockholders meeting for Ignate Inc., a group of stockholders expressed disagreement with the way that the managers were using free cash flow. Because they wanted to be able to control how the cash is invested, the stockholders lobbied that the free cash flow should be:

distributed to them as dividends.

When used effectively, cross-functional teams will often bring about:

faster product development processes.

Institutional owners are:

financial institutions, such as mutual funds and pension funds, that control large-block shareholder positions

A cross-functional work team is having difficulties in operating smoothly, and friction has developed among some of the members. Many of the strongest complaints are from the representatives of management who complain that the research scientists are disorganized, haphazard, and undisciplined. Managers complain that the scientists do not adhere to any fixed rules or procedures. On the other hand, the research scientists complain that the managerial representatives are excessively rule-oriented bureaucrats and have no flexibility or spontaneity. The MAIN problem with this team seems to be centered around differences in:

formality of structure.

The repurchase of the target firm's shares of stock that were obtained by the acquiring firm at a premium in exchange for an agreement that the acquirer will no longer target the company for takeover is called:

greenmail.

Ownership concentration is determined by both the number of:

large-block shareholders and the total percentage of shares they own.

Prints4U is a small printing firm in Minneapolis, MN. As is typical for a firm of this size, the managers own a __________ percentage of the firm. As a result, there is __________ separation between ownership and managerial control.

large; less

The number of patents held by an organization is a rough guide to the:

level of innovation in a firm.

All of the following statements are true about the use of defense tactics by the target firm during a hostile takeover EXCEPT defense tactics:

make the costs of a takeover lower.

Managerial employment risk is the:

managers' risk of job loss, loss of compensation, and/or loss of reputation

In the United States, the fundamental goal of business is to:

maximize shareholder wealth.

The development of the original personal computer (PC) was a(n) __________ innovation at the time, whereas adding a different kind of whitening agent to a soap detergent is an example of a(n) __________ innovation.

novel; incremental

Pet Care Companion Connection (PCCC) is an organization that trains persons with mild-to-moderate mental disabilities to care for pets in a pet boarding facility. This organization has been successful in providing a quality service for pet owners and a supportive training environment for their trainees. The tuition charged to trainees is only somewhat higher than the fee, which day-care providers would charge for these individuals. Graduates of the program are qualified for employment by commercial kennels. PCCC is an example of:

taking advantage of a need in the marketplace.

The dimensions on which functional departments can vary include all of the following EXCEPT __________ orientation.

technological

Monitoring by shareholders is usually accomplished through:

the board of directors.

The governance mechanism MOST closely connected with deterring unethical behaviors by holding top management accountable for the corporate culture is:

the board of directors.

To be successful, an autonomous process for developing new products relies on:

the diffusion of tacit knowledge.

A negative effect of acquiring other firms for the purpose of innovation is:

the effect it can have on the firm's own ability to produce innovations.

Product diversification provides two benefits to managers that do not accrue to shareholders: __________ and __________.

the opportunity for higher compensation through firm growth; a reduction in managerial employment risk

Knowledge must be transferred to others in the firm to enhance the entrepreneurial competence of the firm. This requires that:

the receiving party has adequate absorptive capacity to learn.

There has been an increased need for effective collaboration between board members and top-level managers as boards of directors have become more involved in:

the strategic decision-making process.

The new abrasive, Cubitron II, was developed through cooperative relationships among 3M business units. As such, Cubitron II is an example of:

the use of induced strategic behavior.

Charles is a customer service representative for a home improvement store. He has creative ideas about how to increase customer satisfaction. Charles's talents will MOST likely be used in a firm that:

uses the autonomous strategic behavior form of internal corporate venturing.

Firms develop innovation in all of the following ways EXCEPT:

via divestiture of low-performing units.