(p. 163)-Product life cycles shorten with high-speed technological changes.
(p. 114)-Weekly News Inc. bought the paper mill that supplied paper for printing its
magazine. This is an example of horizontal integration.
(p. 3)-Externalities are costs that are borne by individuals other than those responsible
for creating them.
(p. 218)-A high degree of formalization and standardization in firms results in organic
structures.
(p. 171)-Joint ventures are less appropriate than strategic alliances when a firm places
great importance on access to other firms’ competencies.
(p. 99)-Other things being equal, less customer uncertainty favors earlier timing of
entry.
(p. 49)-An innovation can be competence enhancing to one firm, while competence
destroying for another.
(p. 121)-A firm’s emphasis on a scientific discipline that is central to its core
competency can make the firm less attractive to individuals from other disciplines.
(p. 295)-Firms intending to maximize market share typically use market skimming
pricing strategy.
(p. 113)-According to Porter’s five-force model, the threat of potential entrants is
influenced by the height of entry barriers.
(p. 50)-A modular innovation significantly affects the overall configuration of a system.
(p. 93)-Early leaders are firms that are the first to enter a market.
(p. 268)-As the size of a team increases, the potential for social loafing decreases.
(p. 214)-Coalitions of small firms typically have a well-defined system of authority and
control.
(p. 191)-Patent laws do not vary from country to country.
(p. 292)-Firms should always be racing to launch their products as early as possible.
(p. 121)-Dynamic capabilities enable firms to quickly adapt to emerging markets or
major technological discontinuities.
(p. 145)-The most common use of conjoint analysis is to assess the relative importance
of different product attributes to customers.
(p. 20)-An organization’s overall creativity level is a simple aggregate of the creativity
of the individuals it employs.
(p. 300)-Firms can accelerate distribution of a new technology by bundling it with
another product that is already in wide use.
(p. 114)-Ammunition can be considered a complement for firearms.
(p. 53)-Technologies always get the opportunity to reach their performance limits
before being replaced by a new technology.
(p. 137)-Both net present value and internal rate of return techniques provide concrete
financial estimates that facilitate strategic planning and trade-off decisions.
(p. 308)-A firm can signal its commitment to an industry by making substantial
investments that would be difficult to reverse.
(p. 57)-It is possible for a firm that follows an s-curve model too closely to end up
switching technologies later than it should.
(p. 35)-Knowledge that cannot be readily codified is called explicit knowledge.
(p. 268)-A lack of cross-functional communication can lead to a poor fit between
product attributes and customer requirements.
(p. 296)-Firms in industries characterized by increasing returns will often use the
objective of maximizing market share and a penetration pricing strategy.
(p. 72)-As firms develop complementary technologies to improve the productivity or
ease of utilization of the core technology, the technology becomes less attractive to
other firms.
(p. 24)-Innovation often originates with those who create solutions for their own needs.
(p. 173)-The pooling of supplementary resources can enable partners to achieve market
power.
(p. 188)-If the knowledge underlying a particular technology is tacit, competitors will
typically find it very easy to duplicate.
(p. 84-85)-Future Electronics Inc.’s body scanning machine has been adopted by
majority of the healthcare market. As a result, the company demands a high price from
its customers, which mainly include hospitals. It is not investing much on innovation
and its product variety is also very low. This cost borne by the users in this case is
referred to as:
A. marginal cost.
B. social cost.
C. monopoly cost.
D. deferred cost.
(p. 252)-Theta Cleaning Corp. wants to use the house of quality matrix in designing and
developing a new vacuum cleaner. What is the first step that Theta Cleaning should
take?
A. Identification of customer requirements
B. Determination of the relative value or weight of customer requirements
C. Identification of the engineering attributes that determine the performance of the
vacuum cleaner
D. Evaluation of the competing products to determine how well they meet customer
needs
(p. 113-114)-According to Porter’s five-force model, if a buyer can threaten to backward
vertically integrate, it will:
A. decrease the buyer’s bargaining power.
B. increase the buyer’s bargaining power.
C. increase the supplier’s bargaining power.
D. lower the threat of entry into the industry.
(p. 163)-When technology is progressing rapidly, firms are more likely to:
A. commit themselves to fixed assets that will rapidly become obsolete.
B. avoid forming alliances for projects that are risky and complex.
C. use linkages with other specialized firms to access resources they do not possess.
D. avoid becoming more narrowly specialized.
(p. 79)-A new technology is most likely to be successful in displacing an existing
technology when:
A. its installed base is significantly less than that of the existing technology.
B. the new technology competes only on the value of its stand-alone utility.
C. it eclipses the combined value of the existing technology’s stand-alone utility, its
installed base, and its complementary goods.
D. the new technology’s perceived and anticipated components of value are lower than
its actual components of value.
(p. 138)-With respect to a research and development (R&D) program, which of the
following can be considered the exercise price?
A. The cost of the R&D program
B. The cost of future investment required to capitalize on the R&D program
C. The returns to the R&D investment
D. -The returns to the R&D investment minus the cost of the R&D program
(p. 3)-Technology is, in its purest essence, _____.
A. knowledge
B. dissonance
C. chaos
D. guesswork
(p. 218)-Since much innovation arises from experimentation and improvisation, the
_____ organization structure is typically considered better suited to creativity and
innovation.
A. mechanistic
B. formalized
C. standardized
D. organic
(p. 295)-Genetech Inc. has produced a new generation of video game consoles. The new
product can be used to run the games used in the previous generation of the video game
console as well. In this context, Genetech is most accurately applying the concept of:
A. backward integration.
B. backward compatibility.
C. backward linkage.
D. backward traceability.
(p. 201)-Singing Cards Corp. has decided to make the technology behind its musical
cards open. Which of the following is most likely to be one of the advantages associated
with this decision?
A. The technology will accrue more rapid adoptions.
B. The price of the technology will rise exponentially.
C. The production of complementary goods will cease.
D. The technology’s installed base will accumulate much more slowly.
(p. 196-197)-Sally has come up with a unique recipe for cookies and is selling them
through exclusive outlets all across Atlanta. As the sales skyrocket, her friends tell her
to patent the recipe. However, she is so protective of her recipe that she does not even
want to reveal her secret ingredients to a government agency. Is there anything she can
do to keep the recipe legally protected?
A. No, she cannot protect her recipe unless she is willing to get her recipe patented.
B. Yes, her recipe can be considered a trade secret and she can legally prevent others
from benefiting from her recipe without her permission.
C. Yes, she can declare her recipe to be a trade secret and register it with the U.S. Trade
Secret Agency.
D. No, the recipe is not a tangible product and therefore cannot be protected.
(p. 96)-When Fun Bun Inc., an international fast-food chain, first moved into China, it
had to teach farmers how to grow a particular variety of potatoes, and bakers had to be
taught how to make hamburger buns. This is an example of:
A. corporate social responsibility.
B. an undeveloped supply channel.
C. incumbent inertia.
D. monopoly rents.
(p. 4)-Unicorn Medicines Inc., a pharmaceutical company based in the United States,
has its research and development units spread across the globe. Lately, these research
and development units have not been receiving adequate financial support. Which of
the following is most likely to be the cause for such a situation?
A. Technical innovation leads to lower market segmentation and slower product
obsolescence.
B. Most innovative ideas do not become successful new products.
C. The product development cycle in the pharmaceutical industry is short.
D. The cost associated with pharmaceutical research and development is low.
(p. 54)-When the first personal computers were introduced, Bill started using a
spreadsheet program to maintain his accounts. Bill discovered that this new method of
maintaining his accounts caused his work to become much slower and that if he typed
in the wrong data, it led to more mistakes. This scenario illustrates that:
A. effort invested in an existing technology reaps higher returns than effort invested in a
new technology.
B. effort invested in an incumbent technology is much higher than effort invested in a
new technology.
C. technological discontinuity may initially have lower performance than the incumbent
technology.
D. component innovations are more effective than architectural innovations.
(p. 5)-The innovation process is often conceived of as a funnel because:
A. most innovative ideas become successful new products.
B. it decreases the amount of output achievable from a given quantity of labor and
capital.
C. it increases the importance of production economies of scale.
D. there are many potential new product ideas and only a few make it through the
development process.
(p. 172)-_____ offers a fast way for a firm to extend the reach of its technology that is
nearly free and offers the potential for royalties.
A. Licensing out a technology
B. Forming a joint venture
C. Solo internal development
D. Vertical integration
(p. 272)-Which of the following is an advantage of heavyweight teams?
A. Heavyweight teams have strong cross-functional coordination.
B. The team structure of heavyweight teams increases the possibility of social loafing.
C. Heavyweight teams are typically permanent.
D. The team structure of heavyweight teams decreases the cross-fertilization of ideas.
(p. 293)-BioSense Prosthetics Inc. was a leader in the prosthetics market and was
earning very high profits. The firm developed a new computerized prosthetic arm that
would render its previous models obsolete. It decided to withhold the new computerized
prosthetic arm from the market. This would allow the firm to:
A. minimize its return on investment in developing each generation of the product.
B. make its products backward compatible.
C. avoid cannibalization of the sales of its current prosthetics.
D. build a smaller installed base for the new computerized prosthetics.
(p. 72)-Which of the following statements is true of learning effects?
A. There are substantial differences in the rates at which organizations learn.
B. The learning rate is impervious to organizational factors such as firm strategy.
C. As a technology is adopted, further development and refining of the technology
reduces.
D. The cost of producing a unit rises as the number of units produced increases.
(p. 224)-M&P Inc., a consumer goods manufacturing firm, has subsidiaries throughout
the globe that have to respond to varying local market requirements. Therefore, the firm
has planned to adopt a local-for-local approach to innovation. Which of the following
statement is true in this context?
A. The subsidiaries of M&P and their R&D divisions will be highly autonomous.
B. The subsidiaries will achieve abundance of scale in R&D activities.
C. This approach will make diffusion of valuable innovations across the company
simple.
D. This approach will eliminate redundancy in activities.
(p. 216)-A firm choosing to decentralize its R&D by divisions rather than centralizing it
will have a greater possibility of:
A. maximizing economies of scale in R&D.
B. preventing redundant R&D activities from being performed in multiple divisions.
C. benefiting from the learning-curve effects.
D. matching new products to the requirements of the customers served.
(p. 218)-Which of the following statements is true of standardization?
A. It can ensure that activities within a firm run smoothly and yield predictable
outcomes.
B. It is defined as the degree to which a firm utilizes rules, procedures, and written
documentation to structure the behavior of employees.
C. It involves the use of organic structures instead of mechanistic ones.
D. It encourages the creativity and experimentation that leads to innovative ideas.
(p. 96)-The tendency of existing firms to be slow to respond to changes in the industry
environment due to their large size, established routines, or prior strategic commitments
to existing suppliers and customers is known as:
A. monopoly costs.
B. path dependency.
C. incumbent inertia.
D. technology trajectory.
(p. 58)-Donald is always ready to buy recently launched gadgets and gizmos. Since he
has sufficient financial resources to invest in these products, he is unconcerned about
the risks and uncertainties involved in buying new products. Based on this description,
Donald most likely belongs to the group of:
A. early majority.
B. early adopters.
C. innovators.
D. laggards.
(p. 148)-An efficiency frontier is the range of _____ that optimize a combination of
features of a potential project.
A. product features
B. attribute arrangements
C. hypothetical configurations
D. -conjoint dimensions
(p. 226)-Not-invented-here syndrome occurs when:
A. a division of a firm is reluctant to adopt other divisions’ innovations.
B. a firm tends to adopt innovations developed by competitors.
C. an innovation is openly accepted without testing its suitability.
D. developers of a failed innovation refuse to take responsibility for its failure.
(p. 57)-The CEO of a pharmaceutical company asked his consultant if it was a good
idea to implement the s-curve model to predict when a technology would reach its
limits. The consultant identified a limitation in the use of the model. Which of the
following is most likely the limitation identified by the consultant?
A. Firms cannot influence the shape of the s-curve through their developmental
activities.
B. Unexpected changes in the market can alter the shape of a technology’s s-curve.
C. S-curve models cannot be applied in the pharmaceutical industry.
D. S-curve models are outdated and unrealistic.
(p. 137)-Which of the following is true of the internal rate of return of a project?
A. The discounted cash flow estimates are only as accurate as the original estimates of
the profit.
B. It maximizes the net present value of the investment.
C. It neglects the timing of investment and cash flows.
D. -It does not discriminate against projects that are long term or risky.
(p. 54)-S-curves in technology diffusion are obtained by plotting the:
A. capacity of a technology against time.
B. cumulative number of adopters of a technology against time.
C. performance speed of a technology against effort.
D. performance power of a technology against effort.
(p. 118)-A resource can be extremely difficult to imitate if:
A. it can be readily codified in written form.
B. it is not path dependent.
C. it arises through the complex interaction of multiple people.
D. it is clear how the resource gives rise to value.
(p. 248)-_____ is a distributed problem-solving model whereby a design problem or
production task is presented to people who voluntarily contribute their ideas and effort
in exchange for compensation, intrinsic rewards, or a combination thereof.
A. Championing
B. Crowdsourcing
C. Partly parallel development
D. Sequential development
(p. 114)-Factors that make it difficult or expensive to change suppliers or buyers are
referred to as _____.
A. transactional costs
B. monopoly costs
C. marginal costs
D. switching costs
(p. 28)-_____ is the ability of an organization to recognize, assimilate, and utilize new
knowledge.
A. Cognitive dissonance
B. Absorptive capacity
C. Organizational obsolescence
D. Built-in obsolescence
(p. 113)-Explain the influences on the threat of potential entrants into a market
according to Porter’s five-force model.
(p. 76)-How is a dominant design likely to influence the nature of the technological
discontinuity that will eventually replace it?
(p. 163-164)-What are the advantages and disadvantages of collaborating for research
and product development?
(p. 172)-What are the characteristics of collective research organizations?
(p. 251)-Explain the function of the go/kill gate in the stage-gate process for project
development.
(p. 73)-Explain the concepts of network externalities and installed base.
(p. 1)-Explain how the globalization of markets affects the importance of innovation.
(p. 269)-What are the advantages and disadvantages of having a heterogeneous new
product development team?
(p. 48-50)-Briefly explain the different types of innovation.
(p. 98)-Explain why sometimes the follower and not the first mover of a new
technology is more successful in the marketplace.
(p. 134)-Why do technology start-ups face a much higher cost of capital than larger
competitors? Discuss the sources from which new technology start-ups can obtain
external financing.
(p. 35)-What are some of the downsides to geographical clustering?
(p. 6)-A firm’s organizational structure and control systems have no influence on the
generation of innovative ideas.
FALSE
(p. 214)-What are some of the advantages and disadvantages of large firms in terms of
R&D?
(p. 252-254)-What is quality function deployment (QFD)? What are its advantages?
(p. 119)-What are core competencies?
(p. 307)-In the context of Gladwell’s theories, define the terms connectors, mavens, and
salespersons.