SBE 2-Entrepreneurial Mistakes and Decisions Quiz

Active Labor Market Policies (ALMP)

• Main aim is to enhance employment opportunities and reduce unemployment through various initiatives.
• Concerns arise over adverse selection, where only less capable individuals utilize ALMP, potentially leading to inefficiencies in labor allocation.

Entrepreneurship Education

• Common criticism includes questioning its effectiveness in fostering real entrepreneurial skills and behaviors.
• In a field experiment, one task assigned to kids involved developing business ideas and presenting them.

Venture Capital (VC)

• Two main functions of VC include providing financial resources for startups and offering strategic guidance to enhance business growth.
• A key factor for securing VC funding is having a strong business plan and operational strategy.

Entrepreneurial Exit

• Potential implications of entrepreneurial exit include shifts in market dynamics and the release of resources for new ventures.
• Population Ecology theory suggests firm exit can result from stiff competition and inability to adapt to changes.

Liability of Newness

• This concept refers to the challenges new firms face, such as lack of established relationships and operational stability, often leading to higher exit rates.
• Exit signaling serves as a warning that the firm's business model or market strategy may not be sustainable.

Economic Implications of Exit

• Business exits can free up resources, allowing them to be reallocated to more viable enterprises.
• Older firms may face closure due to inability to adapt to evolving market demands, as explained by Population Ecology theory.

Founders' Human Capital

• Founders' human capital, particularly technical expertise and relevant experience, plays a crucial role in indirectly influencing firm growth.
• Significant growth is often tied to founders with tech work experience, which drives innovation and competitively positions firms.

Management Experience and VC Financing

• Strong managerial experience enhances the chances of attracting VC financing as it reflects competence in handling business operations.
• The tradeoff between entrepreneurship and traditional employment often leaves entrepreneurs with lower margins, creating financial strain.

Public Policy Support

• Public policy can aid small businesses through financial support and creating a conducive regulatory environment.
• The aim of macroeconomic policy is to stimulate entrepreneurship and promote overall economic growth.

Business Support Justification

• Justification for business support stems from the potential for job creation, innovation, and economic resilience.
• Consequences of lack of business resources often include reduced ability to innovate and compete effectively.

Risk Management Improvement

• Experience with decision-making over time enhances a business's capability to take calculated risks.

Industry Impact from Firm Exits

• Exits of older firms can create opportunities for new entrants, leading to industry revitalization.
• Malaysian and Dutch consultants faced initial challenges in pitching their business and improved their approach post-firing the Malaysian partner.

Production Plant Transition

• Moving production to the Netherlands allowed the company to benefit from higher quality standards and reduced costs.
• Lower-cost LED lights from Asia disrupted the industry in the Netherlands and Europe, prompting tight competition.

Firm Survival Challenges

• New firms often struggle due to inadequate market knowledge and established competition.
• Pe’er and Vertinsky's findings highlighted that the exit of older firms can enhance regional productivity by reallocating resources to emerging firms.

Test your knowledge on entrepreneurial mistakes and decisions such as focusing on wrong market segments, low margins, and failed international expansion. Explore the challenges faced by an entrepreneur in running and selling a company.