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Chapter 12 Managing Innovation and Fostering Corporate
Entrepreneurship Answer Key
True / False Questions
1.
The term innovation refers primarily to an invention that uses the latest technologies.
2.
The Dutch Boy twist and pour paint container is an example of a high tech source of
innovation.
3.
Process innovations are often associated with a low cost leadership strategy.
4.
Product innovations are commonly associated with a differentiation strategy.
5.
As an industry matures, there are greater opportunities for change and so innovations tend to
be more radical.
6.
Radical innovations are evolutionary applications of novel ideas within existing paradigms.
7.
Disruptive innovations are those that overturn markets by providing an altogether new
approach to meeting customer needs.
8.
Graphene can be magnetized and used in building computer systems that use spintronics, a
technology that involves processing a signal using magnetic spin rather than electric change.
It has the potential to replace silicon as the primary component of semiconductor chips. This is
an example of disruptive innovation.
9.
There are two major avenues through which companies can expand or improve their business.
One is innovation and the other is strategic renewal.
10.
Sustaining innovations are those that overturn markets by providing an altogether new
approach to meeting customer needs.
11.
A disruptive innovation appeals to less demanding customers who are seeking more
convenient, less expensive solutions.
12.
Proctor & Gamble is centralizing 20 to 30 percent of its research efforts in a new corporate-
level business creation and innovation unit. They believe that this will assist them only with
developing incremental innovations that will help the overall bottom line.
13.
Research indicates that leaders of innovative firms spend 50 percent more time on discovery
activities than the leaders of less innovative firms.
14.
The term strategic envelope refers to the scope of innovation efforts of a firm.
15.
Radical innovation often involves open-ended experimentation which can be very time
consuming.
16.
For innovation team members to work enthusiastically on innovation projects, it is important to
separate the performance of individual team members from the performance of the innovation
itself.
17.
Innovation efforts of the firm rarely benefit from partnering with non-business entities such as
universities and government agencies.
18.
For innovation projects, people from inside the company may have greater social capital and
know the organizational culture, but this may inhibit them from thinking creatively.
19.
Strategic renewal and the pursuit of new venture opportunities are the two primary aims of
corporate entrepreneurship.
20.
Corporate entrepreneurship is sometimes called intrapreneurship.
21.
Corporate venturing that is focused permeates all parts of the organization and involves every
member of the organization.
22.
Firms using a focused approach to corporate entrepreneurship typically separate corporate
venturing activities from ongoing operations of the firm.
23.
Business incubators are designed to support fledgling entrepreneurial ventures until they can
operate as stand-alone businesses.
24.
Corporate business incubators often provide physical space and business services to internal
ventures, but not funding.
25.
Dispersed approaches to corporate entrepreneurship are often found in organizations with a
strong spirit of entrepreneurship.
26.
Product champions are the employees who identify new product ideas or services.
27.
According to the text, new venture ideas must pass through two critical stages to be
implemented by corporations: project definition and project impetus.
28.
Product champions are critical during the period after a new venture project has been defined
but before it has gained momentum and achieved project impetus.
29.
New venture groups are formed within corporations by individuals or a division and usually
have the same mandate as a typical research and development department.
30.
The Taco Bell Waffle Taco was the result of a team development effort. This is an example of
a new venture group (NVG) identifying, evaluating, and cultivating a venture opportunity.
31.
Only about 50 percent of corporate venturing efforts reach profitability within six years of their
launch.
32.
The strategic goals of corporate entrepreneurship are often just as important as the financial
goals.
33.
Exit champions are often reluctant to gather hard data about a venture because it might kill the
project.
34.
Most CE programs have strategic goals. The reasons for undertaking a corporate venture
include maintaining the corporation base of resources and experience.
35.
One of the important questions the corporation must address in assessing the effectiveness of
its venturing initiatives is that of the sustainability of its basis of competitive advantage.
36.
In evaluating the effectiveness of the venturing initiatives of a corporation, marketplace
acceptance of the new products or services needs to be assessed.
37.
When evaluating the effectiveness of the venturing initiatives of a corporation, an assessment
needs to be made of the external competencies of the firm in order to determine if goals such
as leveraging existing assets, building new knowledge, and enhancing company capabilities
are likely to be met.
38.
The failure of the Motorola Iridium global satellite telecom project was a result of its exit
champion.
39.
Exit champions, different from product champions, must be willing to energetically stand up for
what they believe.
40.
Exit champions deal in uncertainty and ambiguity. Product champions reduce ambiguity by
gathering hard data and developing a strong case for why a project should be killed.
41.
Real options logic is useful when corporations consider stock options as a way to finance
entrepreneurial ventures.
42.
Corporate ventures that use real options logic in decision making tend to keep total investment
low in order to minimize the downside risk of a project.
43.
Real options analysis helps managers make investment decisions involving large irreversible
commitments of financial resources.
44.
One of the potential pitfalls of real options analysis is that managers may have the incentive
and know-how to game the system.
45.
Options exist when the owner of the option has the obligation to engage in certain types of
transactions. The most common are stock options.
46.
Stock options offer the prospect of high gains with relatively small up-front investments that
represent limited losses.
47.
A real estate option grants the holder the obligation to buy or sell a piece of property at an
established price sometime in the future.
48.
Intel uses option contracts for the right to purchase key pieces of equipment at a specific
future date. They simulate the likelihood that they will need to purchase a specific piece of
equipment and then create the options contracts to reduce risk and potentially save money.
49.
Managerial conceit occurs when decision makers who have made successful choices in the
past come to believe that they possess superior expertise for managing uncertainty.
50.
Escalation of commitment is the tendency for managers to irrationally stick with an investment,
even one that is broken down into a sequential series of decisions, when investment criteria
are not being met.
51.
The more specific the human capital of the manager becomes, the easier it is to transfer it to
other organizations.
Topic: Real Options Analysis: A Useful Tool
52.
The term skunkworks is used to refer to a type of in-house facility that corporations use to
develop entrepreneurial ideas.
53.
First movers in an industry often capture above-average profits, but usually find it difficult to
maintain early market share gains.
54.
Competitive aggressiveness is a response to threats whereas proactiveness is a response to
opportunities.
55.
Business risk taking refers to the risk associated with entering untested markets or committing
to unproven technologies.
56.
Financial risk taking involves the risk an executive assumes in taking a stand in favor of a
strategic course of action.
57.
Risk taking can lead to competitive advantage, but it needs to be managed carefully.
58.
According to Peter Drucker, successful entrepreneurs typically are risk takers.
59.
Fostering creativity and experimentation is the only innovativeness technique that company
managers should consider when identifying and launching corporate ventures.
60.
Firms can act proactively by introducing new products or technological capabilities after the
competition has entered the market. Amazon and its online bookselling market is a good
example of this.
61.
Companies such as Zimbra, Inc. and Best Practices LLC enhanced their entrepreneurial
positions by using competitive aggressiveness techniques such as entering the marketplace
with drastically lower prices and by copying successful business models.
Multiple Choice Questions
62.
______________ refers to efforts to create designs and applications of technology to develop
new products, while ______________ refers to efforts to improve the efficiency of
organizational systems such as manufacturing and operations.
