TESTBANK: CHAPTER 8
Industry Evolution and Strategic Change
1. According to Charles Darwin it is the strongest of a species that survive.
[See p.205]
2. The main drivers of industry evolution are growth of demand and the production and diffusion of
knowledge.
[See p.207]
3. The industry life cycle follows different phases from the product life cycle.
[See p.207]
4. During the introduction phase of the industry life cycle, different technologies and design
configurations compete for market acceptance.
[See p.218]
5. The firm which sets the dominant product design goes on to be the most profitable firm in the
industry.
[See p. 209]
6. The establishment of a dominant design marks an industry’s transition from the growth phase to the
maturity phase.
[See p.209]
7. The establishment of a dominant design in an industry requires convergence around a common
technical standard.
[See pp.208-209]
8. When an industry coalesces around a common product design, innovation typically shifts from
radical to incremental.
[See p.209]
9. The emergence of a dominant product design tends to coincide with a shift from process innovation
to product innovation
[See p.209]
10. A major incentive for introducing a dominant design is to exploit the intellectual property that is
embodied within it.
[See p.209]
11. Ford’s assembly-line, mass production system and Toyota’s system of lean production were the
two process innovations that transformed the manufacture of automobiles during the 20th century.
[See p.210]
12. Over time, industry life cycles have become increasingly compressed.
[See p.211]
13. The field of organizational ecology (a.k.a. organizational demography) proposes that a key factor
encouraging the entry of new firms during an industry’s early phases of development is the increasing
legitimacy of the industry.
[See p.212]
14. With the onset of the maturity, industries often experience a “shake-out” period.
[See p.213]
15. During an industry’s introductory and growth phases, most companies in an industry are likely to
experience negative free cash flows.
[See pp.214-215]
16. Firms that develop high levels of capability tend to find change easy because they are also able to
develop new capabilities.
[See p.216]8
17. Organizations tend to prefer exploitation of existing knowledge over exploration for new
opportunities.
[See p.216]
18. “Punctuated equilibrium” refers to the tendency for organizations to follow a gradual process of
transition from one equilibrium to another
[See pp.217-218]
19. Long-term change within most industries is achieved through the birth and death of companies
rather than through adaptation by existing companies.
[See p.218]
20. For aircraft manufacturers, the jet engine was a threat since it was a “competence destroying”
innovation.
[See p.220]
21. If a firm focuses closely on meeting the needs of its customers, it is unlikely to be blindsided by
disruptive innovation.
[See p.221]
22. The steam engine was a disruptive innovation for the builders of ocean-going sailing ships because
steam ships were initially slower and less reliable than sailing ships.
[See p.221]
23. Organizational ambidexterity refers to the ability of a single organization to perform multiple
capabilities
[See p.222]
24. IBM’s decision in the late 1970s to establish its new personal computer division in Florida, rather
than close to its headquarters in New York is an example of “contextual ambidexterity.”
[See pp.222-223]
25. Steve Jobs’ insistence that Apple’s development teams commit to “insanely products” that
combined seemingly-impossible performance attributes is an example of how “stretch goals” can
combat organizational inertia.
[See p.223]
26. Multiple scenario analysis is an approach to forecasting that relied heavily upon applying advanced
statistical analysis to “big data.”
[See p.224]
27. Organizations are like people: their essential characteristics—including their capabilities—are
formed in their early stages of development.
[See pp.225-226]
28. Dynamic capabilities are “higher order” capabilities that orchestrate change among operational
capabilities.
[See p. 229]
Multiple Choice Questions
29. The main forces driving industry evolution are:
[See p.207]
30. Which of the following developments is not a typical feature of the transition from the
“introductory” to the “growth” phase of the industry life cycle?
[See pp.207-208]2
31. The duration of the industry life cycle:
[See p.211]
32. The different stages of the industry life cycles are defined primarily on the basis of:
[See p.207]
33. The characteristic profile of an industry life cycle has an ‘S’ shaped curve because:
[See p.209
34. Firm entry rates tend to be highest during the growth stage of an industry life cycle because:
[See pp.212-214]
35. The transition from the introduction to growth phase of the industry life cycle features:
[See p.209]
36. A dominant design is best described as:
[See p.208]
37. Which statement best described the extent to which different industries conform to the same life
cycle pattern?
[See p.211]
38. A technical standard tends to emerge in an industry if:
[See p.208]
39. Industries change mainly as a result of:
[See p.207]
40. “Shakeout”—a period when many firms exit from an industry following a period of intense
competition—characterizes an industry’s transition from:
[See p.213]
41. With the onset of the maturity stage, the number of firms in most industries:
[See p.212]
42. The term “competency trap”, refers to:
[See p.216]
43. According to institutional sociologists, the propensity for organizations to adopt similar structures
(“institutional isomorphism”) is primarily a result of
[See p.216]
44. An organizational routine is:
[See p.216]
45. The field of “organizational ecology” studies:
[See p.218]
46. Which of the following is not a source of organizational inertia?
[See p.216]
47. When an industry is subject to technological change, the ability of new entrants to displace
incumbent firms will be increased if:
[See pp.220-221]
48. The reluctance of shipping companies to switch from sail to steam propulsion can be attributed to
the fact that:
[See p.224
49. When a company places its new businesses or new products into separate organizational units from
its established business activities, this is an example of:
[See pp.222-223]
50. The main reason why a firm’s distinctive capabilities reflect the conditions that the firm faced
during the early years of its development is because:
[See pp.225-226]
51. Organizational structure needs to take account of the capabilities that a company possesses (or
wishes to develop) because:
[See p.228]
52. IBM, 3M, and General Electric are companies that demonstrate, over periods of several decades,
the capacity to adapt to multiple changes in their external environment. These companies are
characterized by:
[See p.229]
53. The problem for companies which reject conventional management principles and adopt radically
new management systems and organizational forms is that:
[See p.231]
54. The capabilities of “craft enterprises” are based upon the tacit knowledge of skilled employees. The
capabilities of “industrial enterprises” are based upon systematized knowledge located within processes. The
key advantage of industrial enterprises over craft enterprises is that:
[See p.231-232]