Final answer:
A) True, Firms require market research to form strategies and reduce the risk of failure. It provides insights into customer preferences and operational efficiencies. As a firm grows, broader investor access replaces the initial reliance on personal knowledge of managers by early-stage investors.
Step-by-step explanation:
Market research is essential for firms to design effective strategies, make informed decisions, and develop contingency plans. This research is crucial whether a firm is considering acquiring another company, merging, or any other significant business decision. Undertaking such research mitigates the propensity of failures as it gives the firm insights into potential customer attraction and production efficiency.
Any young startup firm is a risk, and owners have valuable insights into the firm's potential for success. At the initial stages, when the firm is no more than an idea on paper, angel investors and venture capitalists provide much-needed capital by evaluating the firm's business plan and the founders’ commitment. These early investors need to trust the vision and the team behind the idea.
As firms grow and their market strategies prove profitable, their operations and performance data become more accessible to a broader range of investors. Information about the company products, revenues, costs, and profits becomes available, reducing the emphasis on personal knowledge of the managers and business plans, and enabling investments from sources like bondholders and shareholders.