ENT 486 Test 2

T/F A small company's culture usually develops quickly during the early stages of its formation.

False

T/F Affective commitment is defined as a desire to remain a member of an organization because of awareness of the costs associated with leaving it.

False

T/F As a firm moves from Stage 1 to Stage 4, the pattern of entrepreneurial activities changes in that the entrepreneur becomes less of a manager and more of a doer.

False

T/F Bequeathing equal amounts of ownership to all heirs, including those outside the business, is obviously the fairest and probably the most efficient way to perpetuate a family firm.

False

T/F Entrepreneurial management structure is more hierarchical compared to the flat structure of traditionally managed firms.

False

T/F Even if family members lack the capability to run the business, an entrepreneur should always select a successor from this pool of talent.

False

T/F In an entrepreneurial firm, promotion is a reward and provides the manager with even more resources and therefore further scope for rewards.

False

T/F One of the advantages of a sole proprietorship is its continuity.

False

T/F Research shows that next-generation family members motivated by a need-based commitment instead of a desire-based commitment are the most likely to pursue long-term careers with the family business.

False

T/F The entrepreneur's succession plan should not be made known to the children until the entrepreneur is ready to retire.

False

T/F The motivation for managing one's own business is typically driven out of personal profit.

False

Mario has just begun to personally supervise employees, his firm is in the stage of growth called a. one-person operation. b. intermediate supervision. c. player-coach. d. formal organization.

c

4 C's

command continuity community connection

__________________ is greater value placed on what has been attained rather than future opportunity

endowment effect

T/F Though the distinctive values that motivate and guide an entrepreneur in the founding of a firm are important, these cannot serve as a foundation for competitive advantage in the firm.

False

T/F When a firm reaches Stage 2 (player-coach) in its growth, the entrepreneur withdraws from personal participation in production, selling, writing checks, and record keeping.

False

T/F 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.

False

T/F In Stage II of leadership succession, the introductory stage, the successor becomes acquainted with the family business by playing on the business's premises or around its equipment.

False Stage II involves introducing the child to certain people associated with the firm and to other aspects of the business. It is during Stage I that a potential successor becomes acquainted with the business as a part of growing up (e.g., by playing on the premises and around the equipment).

T/F In Stage I of leadership succession, the pre-business stage, the child begins part-time work in the business.

False The child does not begin part-time work in the firm until Stage III, the introductory functional stage.

T/F Family members can be on the board if they are going to be taking over the business.

false

Agency theory

Agency theory is a theory about incentive problems. It explicitly incorporates conflicts of interest between parties and allows us to study mechanisms for controlling incentive problems.

In negotiations, the endowment effect creates a bias primarily in seller's evaluations. TRUE or FALSE

True

T/F A family business involving two or more children may experience either sibling cooperation or sibling rivalry.

True

T/F A family firm's special patterns and beliefs comprise the firm's organizational culture.

True

T/F A management team is often stronger than an individual entrepreneur because it provides a diversity of skills and assurance of. continuity

True

T/F A succession plan would address stock ownership of active and inactive family members.

True

T/F An entrepreneur typically learns more from failures than from successes.

True

T/F Businesses often do not survive into the second generation because many children do not want to own the family business.

True

T/F Businesses often do not survive into the second generation because of sibling rivalry.

True

T/F In Stage IV of leadership succession, the functional stage, the successor enters full-time employment.

True

T/F One sibling dilemma in a family business has been labeled the predator/parasite conflict.

True

T/F The board of directors is elected by the stockholders of a corporation

True

T/F The desire for continuity of a business might be one reason to organize as a corporation rather than as a partnership.

True

T/F The intermediate supervision stage of business growth is a turning point because the entrepreneur must learn to rise above direct management and work through an intermediate level of managers.

True

T/F The process of preparing a successor for leadership in a family business can take more than a decade.

True

T/F The process of transferring leadership to the next generation is known as succession.

True

enterprising businesses have a _______ degree of innovation and a _________ degree of customer focus

high; high

__________________ - is a central issue for sibling and cousin teams, and a very difficult one to manage.

interdependence

business reinventor have a _______ degree of innovation and a _________ degree of customer focus

low; high

cash-cows have a _______ degree of innovation and a _________ degree of customer focus

low; low

The endowment effect is A. the difference between what sellers demand and what buyers are willing to pay B. a tendency for people to value an object more once they own it C. the value we associate with a certain object or outcome D. saving money instead of purchasing goods

B

The process of transferring leadership to the next generation is known as a. strategy. b. succession. c. stock option planning. d. delayed-entry strategy.

B

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

B

Joins based on the perceived value of ownership stake and opportunity costs a. affective commitment b. normative commitment c. calculative commitment d. dependent commitment

C

Joins based on the perceived value of ownership stake and opportunity costs a. affective commitment b. normative commitment c. calculative commitment d. dependent commitment

C

Leadership roles differ greatly, depending on the size of the business and its _____. a. operating industry b. methods of marketing c. stage of development d. product

C

How often does the board meet?

4 to 6 times a year

A clear succession plan helps the entrepreneur's children a. plan their own careers. b. learn social skills. c. develop entrepreneurial personalities. d. all of the above

A

A corporation's board of directors a. is the governing body for corporate activity. b. directly manages the corporation. c. determines the taxability of dividends. d. usually designs the organizational structure of the firm.

A

If a company was founded by a partnership, transition to the next generation may fail if the children of the partners a. don't get along. b. are not the same sex. c. are different ages. d. all of the above.

A

The residual assets of a sole proprietorship belong to the ____ after the owner's death. a. owner's heirs b. primary investors c. general partners d. creditors

A

Wants to attribute and pursue a career in the firm as most desirable of opportunities a. affective commitment b. normative commitment c. calculative commitment d. dependent commitment

A

What does AGES stand for?

Architecture, Governance, Entrepreneurship, Stewardship

A founder's values become part of the family business culture because a. the founder insists that the values are sound. b. others in the firm learn what's important and absorb traditions established by the founder. c. the values coincide with modern management theory. d. family members follow family traditions without excessive analysis.

B

A meeting of family members to discuss business issues and problems is known as a(an) a. advisory board. b. family council. c. Board of Directors. d. quality committee.

B

An active board of directors serves management of the small firm in the following important ways except a. reviewing policy decisions b. financing the venture c. advising on external business conditions d. offering access to important personal contacts

B

An entrepreneur's plans regarding succession a. should only be told to the child who will be the new manager. b. should be made clear to all family members. c. should not be stated until the entrepreneur is near retirement. d. cannot be developed until shortly before retirement.

B

Ought to join to accommodate the family a. affective commitment b. normative commitment c. calculative commitment d. dependent commitment

B

Sibling rivalry in a family business a. rarely affects nonfamily members in the firm. b. may create disagreements about business policy or about siblings' roles within the business. c. is unusual since only one child will normally be employed in a family business. d. is often good because it spurs healthy business competition.

B

Sibling rivalry in a family business a. rarely affects nonfamily members in the firm. b. may create disagreements about business policy or about siblings' roles within the business. c. is unusual since only one child will normally be employed in a family business. d. is often good because it spurs healthy business competition.

B

Stage III in the process of succession is the a. pre-business stage. b. proof of competence stage c. formal start in the business stage d. education and personal development stage

B

Ted and Fred both own very similar homes on the same street. Ted feels that his house is worth $200,000 while Fred's house is only worth $175,000. Fred feels exactly the opposite. Both Ted and Fred display which one of the following behaviors? A) regret aversion B) endowment effect C) money illusion D) house money

B

A document that states the principles intended to guide a family firm through times of crisis and change, including the succession process is called the a. business plan b. articles of incorporation c. family business constitution d. corporate by-laws

C

A founder of a family business is contemplating turning the business over to his five children. One possibility, the founder believes, is to divide ownership equally among the children. This would a. be impossible. b. be inherently unfair to the children. c. potentially hinder the future functioning of the business. d. require an S corporation.

C

As his small business prospers and grows from Stage 1 to Stage 4, Carlos Perez realizes that he also must grow by increasing his a. doing skills. b. advertising skills. c. managing skills. d. legal skills.

C

Family business constitutions are sometimes synonymous with _____ but the latter are usually more comprehensive. a. business plans b. by-laws c. family protocols d. succession plan

C

Normative commitment differs from continuance commitment in that normative commitment is the employees' choice to stay attached because of: A) the time they have spent working in the organization. B) the effort they have put while working for the organization. C) strong cultural or familial ethics that drive them to do so. D) the fear of social losses they would incur if they left the organization

C

Susan Keller has seen her retail shop grow to the point that she has designated supervisors for the office and two selling areas. Her shop's stage of growth is called a. one-person operation. b. player-coach. c. intermediate supervision. d. formal organization.

C

Which of the following is not an advantage of a family-owned business? a. shared social networks b. focus on the long-run c. an objective business perspective d. reduced cost of control

C

. 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.

D

A small firm's basic path to the future is spelled out in a document called a a. feasibility study. b. short-range plan. c. budget. d. long-range plan.

D

A successful transfer to the next generation requires the transfer of a. company assets. b. leadership. c. values. d. all of the above.

D

A succession plan for a family business should state a. if the business is to remain in the family or if it will be sold to an outsider. b. which child, if any, will take over the top position. c. the hiring and compensation policy for family members. d. all of the above.

D

A succession plan for a family business would address a. the hiring and compensation policy for family members. b. whether a low-entry or delayed-entry strategy will be used. c. stock ownership of active and inactive family members. d. all of the above.

D

All of the following are stages of consumer decision making except a. post-purchase evaluation. b. purchase decision. c. problem recognition. d. perceptual categorization.

D

An advisory board may include a. family members. b. nonfamily employees. c. outsiders. d. all of the above.

D

An employee's emotional attachment to and identification with the firm is ___________. A) continuance commitment B) normative commitment C) organizational citizenship behavior D) affective commitment

D

Businesses often do not survive into the second generation because a. the children do not want the long hours of work and commitment required by the business. b. of sibling rivalry. c. it is difficult for the entrepreneur to relinquish management. d. all of the above.

D

Family retreats, which open lines of communication, a. use the father as a communication facilitator. b. avoid discussing sensitive issues. c. involve family members but not in-laws. d. may result in formation of a family council to continue discussion.

D

Joins the firm as a safe career haven a. affective commitment b. normative commitment c. calculative commitment d. dependent commitment

D

Joins the firm as a safe career haven a. affective commitment b. normative commitment c. calculative commitment d. dependent commitment

D

Stage 1 in the growth of a business is characterized by a. entrepreneur as player-coach. b. multilayered organization. c. hands-off management practices. d. one-person operation.

D

The process of preparing a family successor for leadership in the family business often takes a. weeks. b. months. c. about one year. d. a decade or longer.

D

The use of written policies, budgets, and job descriptions is most closely associated with which of the following stages of growth? a. One-person operation b. Player-coach c. Intermediate supervision d. Formal organization

D

When a son or daughter begins working at the family business full-time, he or she is in _____ of the process of succession. a. Stage I b. Stage II c. Stage III d. Stage IV

D

Which of the following is true of family-owned businesses? a. There is often more trust among family members than with outside employees. b. The success of a family and the success of a business are based on different criteria. c. Family issues often spill over into business operations. d. All of the above.

D

___________ is where company and management financial performance can be reviewed

annual shareholders meetings

T/F Intermediate supervision, which occurs in Stage 3 of small business growth, involves the use of budgets, personnel policies, organizational charts, and computerization.

FAlse

____________ is where board of directors are elected

annual shareholders meetings

the board of directors mission is guided by the implications of _____________.

agency theory

Family businesses use ________ to respond rapidly to changing business needs.

agility

The ___________ CEO exit style allows others to learn the business first-hand and then eventually manage it.

ambassador

__________ is a CEO exit still that holds on to their diplomatic and representational duties on behalf of the corporation

ambassador

The more efficient a company, the greater is its _____________.

profitability

Next-generation leaders are often sensitive to the need for _______________ toward change

quick action

when it comes to mid sized family firms, particularly those that are privately held, are guided more by the implications of _______________.

stewardship theory

One board retreat that focuses on ________________ per year if possible

strategic planning

Agency theory deals with the issue of

the conflicts that can arise between the viewpoints and motivations of a firm's owners and managers