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CMA Final · Entrepreneurship and Startup · Entrepreneurial Skill Sets

Which statement correctly distinguishes an entrepreneur's 'tolerance for ambiguity' from 'risk-taking propensity'?

Tolerance for ambiguity is comfort in acting when information is incomplete and outcomes or probabilities are unclear. Risk-taking propensity is the willingness to commit resources to ventures with uncertain returns. They are related but distinct traits, so they are not interchangeable.

  1. ATolerance for ambiguity is comfort in acting when outcomes and probabilities are unclear, whereas risk-taking propensity is willingness to commit resources to ventures with uncertain returnsCorrect
  2. BTolerance for ambiguity means preferring certain outcomes, whereas risk-taking propensity means preferring gambles
  3. CThe two terms mean exactly the same and are interchangeable
  4. DTolerance for ambiguity refers to financial leverage, whereas risk-taking propensity refers to team size

Explanation

Ambiguity tolerance is about handling unclear, incomplete information and unknown probabilities. Risk-taking propensity is the willingness to commit resources despite uncertain payoffs. Option B reverses the meaning of ambiguity tolerance, and the others are unrelated to the concepts.

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