New Venture Creation Entrepreneurship

for the 21st Century 10th Edition

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 Chapter 06

Opportunities for Social Entrepreneurship

True / False Questions

1. By definition, any form of entrepreneurship is called social enterprising.

True False

2. The primary difference between traditional ventures and social purpose ventures is the primary
market impact.

True False

3. Social purpose ventures are founded to solve a social problem through an economically viable
entity.

True False

4. There are probably more hybrid models of social entrepreneurship than social ventures and
enterprising nonprofits combined.

True False

5. Corporate social responsibility (CSR), which emphasizes doing good and serving communities
while still making a profit, provides good examples of hybrid models of social entrepreneurship.

True False

6. Unlike traditional startups, social ventures do not typically use bootstrapping as a means of
resource acquisition.

True False

7. Solutions to wicked problems are not right or wrong.

True False

8. A social entrepreneur must accept that a wicked problem is never fully solved, and the solution is
not likely to meet all expectations.

True False

9. Venture philanthropy provides value-added funding for nonprofit organizations to increase their
potential for developing revenue streams.

True False

6-1
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
10. Muhammad Yunus revolutionized the banking industry in the late 1970s by offering microloans to
the poorest of the poor with heavy collateral.

True False

Multiple Choice Questions

11. What is true of enterprising nonprofits pursuing earned-income activities?

A. They have very few employees when compared to other types of nonprofits.
B. They incorporate outside investment in the form of philanthropy.
C. They believe they are less entrepreneurial when compared to other types of nonprofits.
D. They typically do not wait for complete financing before starting a business.

12. Which of the following is a method of resource acquisition in social entrepreneurship?

A. Interpolating
B. Bootstrapping
C. Accelerated vesting
D. Featherbedding

13. According to the Timmons Model of the entrepreneurial process, the brain trust aspect of the
team is especially important because:

A. collaboration across boundaries is paramount in social entrepreneurship.

B. it replaces the bootstrapping method of resource acquisition in social entrepreneurship.
C. capital markets do not exist for social entrepreneurs.
D. available funds are decreasing in the not-for-profit sectors.

14. Which of the following is a characteristic of wicked problems?

A. They have well-defined and stable problem statements.

B. They come with a limited set of alternative solutions.
C. Every problem is unique and novel.
D. The solution to these problems can be easily tried and abandoned.

15. In the early 1970s, the notion of wicked problems emerged out of the complexity of resolving
issues related to ____.

A. price inflation
B. oil shortages
C. urban and governmental planning
D. declining gross domestic product (GDP)

6-2
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
16. Why is access to capital an increasing challenge for social entrepreneurs?

A. Because capital markets do not exist for not-for-profit sectors

B. Because nonprofits are not sustainable and scalable
C. Because of competition from other social ventures
D. Because of using bootstrapping as a method of resource acquisition

17. _____ is a type of social venture capital whose purpose is typically economic development and
job creation in impoverished areas.

A. Focused fund
B. Community fund
C. VC with a conscience
D. Philanthropy fund

18. Social venture capitals seek to invest in for-profit ventures not only for financial return but also for
social and environmental returns that are referred to as ____.

A. social venture commitments

B. enterprising nonprofits
C. triple bottom line
D. double top line

19. The Grameen Bank in Bangladesh offers:

A. microloans.
B. focused loans.
C. collateralized loans.
D. amortized loans.

Fill in the Blank Questions

20. _____ is derived from entrepreneurial activities that seek to address problems related to people
and problems related to the planet—regardless of profit orientation.

________________________________________

21. Enterprising nonprofits may incorporate outside investment, in the form of ____, to scale the
organization for increased social impact.

________________________________________

22. The primary difference between traditional entrepreneurship and social entrepreneurship is the
____.

________________________________________

6-3
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
23. The Fourth Sector Project seeks to recognize a new model of social entrepreneurship known as
the _____ model.

________________________________________

24. According to the Timmons Model of the entrepreneurial process, the _____ aspect of a team
refers to the external stakeholders.

________________________________________

25. Unlike tame problems, wicked problems do not have a predetermined ____, so a social
entrepreneur is forced to make rational choices based on a rigorous evaluation of trade-offs.

________________________________________

26. A venture that invests in early-stage companies operating in the education and health care areas
of social concern and explicitly promotes the environmental and social focus of its funds is an
example of a(n) _____ fund, a type of social venture capital.

________________________________________

27. _____ is a type of social venture capital that stipulates that a certain percentage of funds will be
invested in socially responsible businesses related to a venture's target investment area.

________________________________________

28. _____ provides value-added funding for nonprofit organizations to increase their potential for
social impact.

________________________________________

29. Venture philanthropists have a close, hands-on relationship with social entrepreneurs and the
ventures they support, driving innovative and scalable models of social change. This refers to the
_____ characteristic of venture philanthropy.

________________________________________

Short Answer Questions

30. What is the result of social entrepreneurship?

6-4
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McGraw-Hill Education.
31. How do social and enterprising nonprofits differ from hybrid models?

32. Why are corporate social responsibility (CSR) practices not considered examples of hybrid
models of social entrepreneurship?

33. What are a few pressing social problems that could provide opportunity spaces for social
entrepreneurs?

34. Briefly discuss any two accepted principles of venture philanthropy from the European Venture
Philanthropy Association (EPVA).

6-5
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Essay Questions

35. What are the two types of enterprising nonprofits and how do they differ?

36. Using the Grameen Bank in Bangladesh as an example, explain how microloans work.

6-6
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
 Chapter 06 Opportunities for Social Entrepreneurship Answer Key

True / False Questions

1. By definition, any form of entrepreneurship is called social enterprising.

(p. 144)
FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

2. The primary difference between traditional ventures and social purpose ventures is the
(p. 151) primary market impact.

FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

3. Social purpose ventures are founded to solve a social problem through an economically viable
(p. 143) entity.

TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

4. There are probably more hybrid models of social entrepreneurship than social ventures and
(p. 146) enterprising nonprofits combined.

TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

5. Corporate social responsibility (CSR), which emphasizes doing good and serving communities
(p. 146) while still making a profit, provides good examples of hybrid models of social
entrepreneurship.

FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

6. Unlike traditional startups, social ventures do not typically use bootstrapping as a means of
(p. 147) resource acquisition.

FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

6-7
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
7. Solutions to wicked problems are not right or wrong.
(p. 147)
TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

8. A social entrepreneur must accept that a wicked problem is never fully solved, and the solution
(p. 148) is not likely to meet all expectations.

TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

9. Venture philanthropy provides value-added funding for nonprofit organizations to increase

(p. 149) their potential for developing revenue streams.

FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

10. Muhammad Yunus revolutionized the banking industry in the late 1970s by offering microloans
(p. 150) to the poorest of the poor with heavy collateral.

FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

Multiple Choice Questions

11. What is true of enterprising nonprofits pursuing earned-income activities?

(p. 145)

A. They have very few employees when compared to other types of nonprofits.
B. They incorporate outside investment in the form of philanthropy.
C. They believe they are less entrepreneurial when compared to other types of nonprofits.
D. They typically do not wait for complete financing before starting a business.
Accessibility: Keyboard Navigation
Blooms: Remember
Level of Difficulty: 1 Easy

6-8
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
12. Which of the following is a method of resource acquisition in social entrepreneurship?
(p. 147)

A. Interpolating
B. Bootstrapping
C. Accelerated vesting
D. Featherbedding
Accessibility: Keyboard Navigation
Blooms: Remember
Level of Difficulty: 1 Easy

13. According to the Timmons Model of the entrepreneurial process, the brain trust aspect of the
(p. 147) team is especially important because:

A. collaboration across boundaries is paramount in social entrepreneurship.

B. it replaces the bootstrapping method of resource acquisition in social entrepreneurship.
C. capital markets do not exist for social entrepreneurs.
D. available funds are decreasing in the not-for-profit sectors.

Accessibility: Keyboard Navigation

Blooms: Understand
Level of Difficulty: 2 Medium

14. Which of the following is a characteristic of wicked problems?

(p. 147)

A. They have well-defined and stable problem statements.

B. They come with a limited set of alternative solutions.
C. Every problem is unique and novel.
D. The solution to these problems can be easily tried and abandoned.
Accessibility: Keyboard Navigation
Blooms: Understand
Level of Difficulty: 2 Medium

15. In the early 1970s, the notion of wicked problems emerged out of the complexity of resolving
(p. 147) issues related to ____.

A. price inflation
B. oil shortages
C. urban and governmental planning
D. declining gross domestic product (GDP)

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

6-9
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
16. Why is access to capital an increasing challenge for social entrepreneurs?
(p. 148)

A. Because capital markets do not exist for not-for-profit sectors

B. Because nonprofits are not sustainable and scalable
C. Because of competition from other social ventures
D. Because of using bootstrapping as a method of resource acquisition
Accessibility: Keyboard Navigation
Blooms: Remember
Level of Difficulty: 1 Easy

17. _____ is a type of social venture capital whose purpose is typically economic development
(p. 149) and job creation in impoverished areas.

A. Focused fund
B. Community fund
C. VC with a conscience
D. Philanthropy fund

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

18. Social venture capitals seek to invest in for-profit ventures not only for financial return but also
(p. 148) for social and environmental returns that are referred to as ____.

A. social venture commitments

B. enterprising nonprofits
C. triple bottom line
D. double top line

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

19. The Grameen Bank in Bangladesh offers:

(p. 150)

A. microloans.
B. focused loans.
C. collateralized loans.
D. amortized loans.

Accessibility: Keyboard Navigation

Blooms: Remember
Level of Difficulty: 1 Easy

Fill in the Blank Questions

6-10
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
20. _____ is derived from entrepreneurial activities that seek to address problems related to
(p. 143) people and problems related to the planet—regardless of profit orientation.

Social value

Blooms: Remember
Level of Difficulty: 1 Easy

21. Enterprising nonprofits may incorporate outside investment, in the form of ____, to scale the
(p. 145) organization for increased social impact.

philanthropy

Blooms: Remember
Level of Difficulty: 1 Easy

22. The primary difference between traditional entrepreneurship and social entrepreneurship is the
(p. 151) ____.

intended mission

Blooms: Remember
Level of Difficulty: 1 Easy

23. The Fourth Sector Project seeks to recognize a new model of social entrepreneurship known
(p. 146) as the _____ model.

for-benefit

Blooms: Remember
Level of Difficulty: 1 Easy

24. According to the Timmons Model of the entrepreneurial process, the _____ aspect of a team
(p. 147) refers to the external stakeholders.

brain trust

Blooms: Remember
Level of Difficulty: 1 Easy

25. Unlike tame problems, wicked problems do not have a predetermined ____, so a social
(p. 148) entrepreneur is forced to make rational choices based on a rigorous evaluation of trade-offs.

stopping rule

Blooms: Remember
Level of Difficulty: 1 Easy

26. A venture that invests in early-stage companies operating in the education and health care
(p. 149) areas of social concern and explicitly promotes the environmental and social focus of its funds
is an example of a(n) _____ fund, a type of social venture capital.

focused

Blooms: Remember
Level of Difficulty: 1 Easy

6-11
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McGraw-Hill Education.
27. _____ is a type of social venture capital that stipulates that a certain percentage of funds will
(p. 149) be invested in socially responsible businesses related to a venture's target investment area.

VC with a conscience

Blooms: Remember
Level of Difficulty: 1 Easy

28. _____ provides value-added funding for nonprofit organizations to increase their potential for
(p. 149) social impact.

Venture philanthropy

Blooms: Remember
Level of Difficulty: 1 Easy

29. Venture philanthropists have a close, hands-on relationship with social entrepreneurs and the
(p. 149) ventures they support, driving innovative and scalable models of social change. This refers to
the _____ characteristic of venture philanthropy.

high engagement

Blooms: Remember
Level of Difficulty: 1 Easy

Short Answer Questions

30. What is the result of social entrepreneurship?

(p. 143)

Social value is derived from social entrepreneurial activities that seek to address problems
related to people and the planet, regardless of profit orientation. In other words, social
entrepreneurship seeks creative and valuable solutions to such issues as education, poverty,
health care, global warming, water shortages, and energy.

Blooms: Remember
Level of Difficulty: 1 Easy

31. How do social and enterprising nonprofits differ from hybrid models?
(p. 151)

The primary mission of both social ventures and enterprising nonprofits is social regardless of
market impact. The hybrid model equally emphasizes social and economic goals.

Blooms: Remember
Level of Difficulty: 2 Medium

6-12
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McGraw-Hill Education.
32. Why are corporate social responsibility (CSR) practices not considered examples of hybrid
(p. 146) models of social entrepreneurship?

Corporate social responsibility (CSR) emphasizes helping and serving communities while still
making a profit. Corporations with CSR practices impact the communities in which they
operate and other stakeholders in many ways, but it is not the core component of their
business models.

Blooms: Remember
Level of Difficulty: 1 Easy

33. What are a few pressing social problems that could provide opportunity spaces for social
(p. 148) entrepreneurs?

The goals that represent the UN's view of the most pressing social problems could provide
opportunity spaces for social entrepreneurs. These goals are: eradicate extreme poverty and
hunger, achieve universal primary education, promote gender equality, reduce child mortality,
improve maternal health, combat diseases, ensure environmental sustainability, and develop a
global partnership for development.

Blooms: Remember
Level of Difficulty: 1 Easy

34. Briefly discuss any two accepted principles of venture philanthropy from the European Venture
(p. 149) Philanthropy Association (EPVA).

Venture philanthropists provide substantial and sustained financial support to a limited number
of organizations. Support typically lasts at least three to five years, with an objective of helping
the organization to become financially self-sustaining by the end of the funding period. This is
termed multiyear support. As in venture capital, venture philanthropists take an investment
approach to determine the most appropriate financing for each organization. Depending on
their own missions and the ventures they choose to support, venture philanthropists can
operate across the spectrum of investment returns. This is termed tailored financing.

Blooms: Remember
Level of Difficulty: 1 Easy

Essay Questions

6-13
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McGraw-Hill Education.
35. What are the two types of enterprising nonprofits and how do they differ?
(p. 145)

The first type utilizes earned-income activities, a form of venturing, to generate all or a portion
of total revenue. These enterprising nonprofits apply the principles of entrepreneurship to
generate revenue to sustain their mission-driven organizations. The second type has a focus
on growth and economic sustainability. Such an enterprising nonprofit may incorporate outside
investment, in the form of venture philanthropy, to scale the organization for increased social
impact.

Blooms: Understand
Level of Difficulty: 2 Medium

36. Using the Grameen Bank in Bangladesh as an example, explain how microloans work.
(p. 150)

The Grameen Bank offers microloans with no collateral to the poorest of the poor in
Bangladesh. Borrowers are organized into groups of five, but not all members can borrow at
once. Two borrowers may receive a microloan at one time; but not until these two borrowers
begin to pay back the principal plus interest can the other members become eligible for their
own loans. The average interest rate is 16 percent, and the repayment rate is an
unprecedented 98 percent, which is attributed to group pressure, empowerment, and
motivation. The loans are tiny—typically enough to buy a goat, tools, or a small piece of
machinery that can be used to produce new sources of income.

Blooms: Understand
Level of Difficulty: 2 Medium

6-14
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McGraw-Hill Education.