Question 1

Another way to evaluate a corporate venture is in terms of the four criteria from the balanced scorecard. Which of the following is not one of those criteria?

Accepted Answer

The four criteria from the balanced scorecard are customer perspective, internal business perspective, innovation and learning perspective, and financial perspective. Supplier perspective is not one of the criteria.

Question 2

Which of the following dimensions of entrepreneurial orientation is described as a forward-looking perspective characteristic of a marketplace leader that has the foresight to seize opportunities?

Accepted Answer

Proactiveness is the dimension of entrepreneurial orientation that refers to the ability of a firm to anticipate and act on future opportunities. It involves a forward-looking perspective and the ability to seize opportunities before competitors do. Therefore, A is the best choice as it describes the characteristic of having foresight to seize opportunities. B, C, and D do not fit this description.

Question 3

One of the pitfalls of real options analysis is that managers may have an incentive and know-how to game the system and back-solve a formula to get a proposal approved. This can give riseto

Accepted Answer

Managers may have an incentive and the know-how to game the system. If managers know that a certain option value must be met in order for the proposal to get approved, they can back-solve the model to find a variance estimate needed to arrive at the answer that upper management desires. This is an example of an agency problem that is typically inherent in investment decisions. A manager may have something to gain by not acting in owner best interests, or the interests of managers and owners are not co-aligned.

Question 4

Real options analysis (ROA) is an investment analysis tool from the field of finance. When applied to entrepreneurship, it suggests a path that companies can use to manage the ________associated with launching ________ ventures.

Accepted Answer

Real options analysis deals with managing uncertainty, and when applied to entrepreneurship, it helps companies manage the risks associated with launching new ventures. Choice A is incorrect because ROA does not deal with certainty, but rather, uncertainty. Choice B is incorrect because ROA is not used to analyze stable ventures, but rather, ventures with significant uncertainty. Choice D is incorrect because ROA is not used to manage interests, but rather, risks and uncertainties.

Question 5

Real options analysis is most appropriate when

Accepted Answer

Real options analysis is most appropriate when there is a possibility of subsequent investments. This technique allows for flexibility and the ability to adjust investment decisions as new information becomes available. It is often used in situations where there is uncertainty about the future, and where the cost of making a mistake could be high. Real options analysis can also be useful when the initial investment required is relatively small, but subsequent investments will be much larger. Therefore, option C is the best choice.

Question 6

Whereas ________ are willing to violate procedures and operate outside normal channels, ________ gather hard data and develop a strong case for why a project should be killed.

Accepted Answer

Product champions tend to be emotionally attached to their projects and may be reluctant to let them go, whereas exit champions are advocates for shutting down projects that are not meeting business objectives. Exit champions also gather data and make a strong case for why a project should be killed, rather than acting impulsively or outside of normal channels.

Question 7

The costly Motorola global satellite telecom project known as Iridium provides a useful illustration of the ________. Even though problems with the project existed during the lengthy development process, Motorola refused to pull the plug. Only after investing 5 billion USD and years of effort was the project abandoned.

Accepted Answer

An exit champion is an individual working within a corporation who is willing to question the viability of a venture project by demanding hard evidence of venture success and challenging the belief system that carries a venture forward. Motorola did not have an exit champion and therefore wasted resources long past the time that the project needed to end.

Question 8

One of the following statements about innovativeness is false. Which is it?

Accepted Answer

Innovativeness refers to efforts of a firm to find new opportunities and novel solutions. It involves creativity and experimentation that result in new products, new services, or improved technological processes.

Question 9

Which of the following is not one of the dimensions of entrepreneurial orientation?

Accepted Answer

Opportunism is actually one of the dimensions of entrepreneurial orientation, along with proactiveness, risk taking, and autonomy.

Question 10

One of the following is not a question that should be answered when evaluating the performance of corporate venturing efforts. Which is it?

Accepted Answer

Three questions should be used to assess the effectiveness of the venturing initiatives of the firm:are the products or services offered by the venture accepted in the marketplace; are the contributions of the venture to the internal competencies and experience of the corporation valuable; and is the venture able to sustain its basis of competitive advantage? External funding may not be critical to success.

Question 11

After 15 teams created 128 different phones, Chris Galvin, former CEO of Motorola, eliminated the autonomous teams being used to develop new wireless phones. This was necessary becausesuch teams

Accepted Answer

The given passage states that autonomous teams lack coordination, which can be taken as a disadvantage in the development process. Hence, eliminating them would create a more coordinated effort towards phone development. Option B is not relevant to the given passage. Option C is incorrect as duplication of effort is not desirable in a business setting. Option D is not mentioned in the passage.

Question 12

Intel uses a forecasting model for potential demand for its chip designs in which they calculate the likelihood of a range of potential demand levels and they established a computer simulation of a production plant. From these models, they gather the information to identify what equipment they definitely will need to order. This helps with pricing as well. What kind of investment analysis tool are they using?

Accepted Answer

The forecasting model used by Intel to calculate the likelihood of potential demand levels and establish a computer simulation of a production plant is an example of Real Options Analysis. Real Options Analysis involves using financial models to analyze and value investment opportunities that have multiple potential outcomes or options. In this case, Intel is using the model to make decisions about what equipment to order, which is a type of investment decision with multiple potential outcomes. The model is used to forecast potential demand and identify the optimal investment strategy for the company.

Question 13

Which of the following dimensions of entrepreneurial orientation is described as an independent action by an individual or team aimed at bringing forth a business concept or vision andcarrying it through to completion?

Accepted Answer

Autonomy refers to the ability of individuals or teams to take independent action in pursuit of their entrepreneurial goals. This involves developing a business concept or vision and carrying it through to completion without relying on external guidance or control.

Question 14

Which of the following statements about skunkworks is false?

Accepted Answer

Skunkworks do not refer to a specialized type of outside contractor, but rather independent work groups within a corporation that are given the freedom to innovate and develop new ideas without the constraints of bureaucracy and company regulations.

Question 15

Strategic reasons for undertaking a corporate venture do not include

Accepted Answer

Reinforcing stakeholder commitment is not necessarily a strategic reason for undertaking a corporate venture, as it is more of a tactical reason. Strategic reasons typically involve long-term goals such as entering new markets, expanding capabilities, and building the base of corporation resources.

Question 16

Some of the most common applications of real options are with property and insurance. A real estate option grants the holder the right to buy or sell a piece of property at an establishedprice sometime in the future. If the price of the property goes ________, the owner of the option is likely to buy it. If the market value of the property ________ the strike price, the option holder is unlikely to execute the purchase.

Accepted Answer

Some of the most common applications of real options are with property and insurance. A real estate option grants the holder the right to buy or sell a piece of property at an established price sometime in the future. The actual market price of the property may rise above the established (or strike) price or the market value may sink below the strike price. If the price of the property goes up, the owner of the option is likely to buy it. If the market value of the property drops below the strike price, the option holder is unlikely to execute the purchase. In the latter circumstance, the option holder has limited his or her loss to the cost of the option but during the life of the option retains the right to participate in whatever the upside potential might be.

Question 17

Whereas ________ often emerge as heroes, ________ run the risk of losing status by opposing popular projects.

Accepted Answer

Whereas product champions often emerge as heroes, exit champions run the risk of losing status by opposing popular projects.

Question 18

If managers believe that their abilities can reduce the risks inherent in decision making to a much greater extent that they actually can, they might demonstrate ________ and trust only their own judgment rather than conduct sufficient analysis.

Accepted Answer

The phrase "managerial conceit" directly reflects the described behavior of managers overestimating their abilities and trusting their own judgment too much. None of the other options address this specific scenario. A) Agency problems refer to conflicts of interest between shareholders and management. B) Reasoning by analogy is a cognitive bias where an individual assumes that because two things are similar in some respects, they are also similar in other respects. D) Escalation of commitment refers to the tendency to continue investing in a failing decision, even when evidence suggests it is not working.

Question 19

A(n) ________ manager's role is to question the viability of corporate venture projects.

Accepted Answer

An exit champion is responsible for evaluating and questioning the viability of corporate venture projects in order to determine if it is necessary to exit the project. Product champion is responsible for promoting the success of a specific product, rising star is an employee who shows great potential for advancement, and mentor is responsible for guiding and advising a less experienced colleague.

Question 20

A manager might insist that separating a decision into multiple parts will guarantee that the decisions made will turn out well. This allows for an assessment of the project at each stage,lessening the likelihood the project will fall prey to which of the following?

Accepted Answer

Separating a decision into multiple parts can prevent escalation of commitment, where a project continues despite evidence that it is failing, due to sunk costs and pride in the decision already made. This approach allows for reevaluation and adjustment at each stage, reducing the likelihood of continuing down a failing path.

Quiz 12: Managing Innovation and Fostering Corporate Entrepreneurship