Entrepreneurial Management Chapter 5

In the U.S., family businesses are estimated to represent what percentage of all enterprises?

80%-90%

In a 2007 study conducted by MassMutual Financial Group ___ percent of respondents said family members share the same values.

87%

A major weakness of a family business is that it has greater difficulty than a nonfamily business in focusing on long-run decision making.

False

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

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

When a parent retires completely and turns the firm over to a son or daughter, the firm ceases to be a family business.

False

Which of the following is the most appropriate and useful role for the entrepreneurs spouse in maintaining good family relationships in a business?

Listener

When a son or daughter begins working at the family business full-time, he or she is in _____ of the process of succession.

Not Stage I Probably Stage IV

An advantage of a family business is that because key employees are related and trust one another, a firm can spend less on systems designed to reduce theft and to monitor employees' work habits.

True

Husband-wife teams that own a business are popularly referred to as co-preneurs.

True

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

True

The process of preparing a family successor for leadership in the family business often takes

a decade or longer.

A family retreat is designed to

bring family members together to openly discuss business matters.

A parent might attempt to resolve a transfer of ownership by giving active children in the firm's management _____ stock and giving nonactive children _____ stock.

common, preferred

Sibling rivalry in a family business

may create disagreements about business policy or about siblings roles within the business.

Family retreats, which open lines of communication,

may result in formation of a family council to continue discussion.

People with higher levels of desire- and _____ based commitment are more likely to support efforts to promote change, which is common in small businesses and very important to their performance and survival.

obligation-based

In a family business, the interests of the family and the interests of the business are best described as

overlapping.

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

potentially hinder the future functioning of the business.

A primary benefit deriving from the strength of family relationships is the willingness of family members to

sacrifice salaries and dividends when necessary.