TESTBANK: CHAPTER 9
Technology-based Industries and the Management of Innovation
True/False Questions
1. Invention and innovation are essentially the same.
[See p.243
2. The cycle of innovation—from the generation of new scientific knowledge to the diffusion of the
innovation—takes about the same length of time for digital products as for analogue products.
[See p.244]
3. The history of innovation supports Emerson’s prediction that superior technology (“a better
mousetrap”) is usually translated into success in the commercial marketplace.
[See p.244]
4. Research shows that across firms, R&D intensity and frequency of new product introductions is
positively correlated with profitability
[See p.244]
5. In relation to innovation, the term “regime of appropriability” describes the conditions which
influence how the returns to innovation are distributed between the innovator and other parties
[See p.245]
6. The ability of an innovating firm to appropriation of returns to its innovation is independent of its
ability to establish property rights in the innovation
[See p.246]
7. Empirical research shows that for both product and process innovations, patents are more effective at
protecting innovation than secrecy.
[See p.249]
8. The more an invention is embedded within a complex, multifunctional product, the greater the share
of the value that is appropriated by the suppliers of complementary resources.
[See p.228]
9. Across most industries patents offer the greater protection to product innovations than to process
innovations.
[See p.249]
10. ‘Freedom to design’ refers to firms’ ability to use each other’s patents through a comprehensive
cross licensing agreement
[See pp.250-251]
11. The main advantage of licensing as a means of exploiting an innovation is that the innovator can
profit from the innovation without the need to invest in the complementary resources and capabilities
required for commercialization
[See p.251]
12. The best strategy for exploiting an innovation depends on two major factors: first, the strength of
the firm’s intellectual property in the innovation and, second, the resources and capabilities available to
the firm.
[See p.250]
13. Being the leader in introducing an innovation to the market is usually better than being a follower.
[See pp.252-253]
14. A standard is a format or interface that allows interoperability.
[See p.255]
15. Network externalities exist when the value of a product to an individual depends on the number of
other users.
[See p.257]
16. The network externalities that support EBay’s dominance of the market online auctions are
primarily the result of the availability of complementary products and services.
[See p.257]
17. In the markets for digital products, “platforms”—the interfaces within two-sided markets are
typically based upon operating systems.
[See p. 258]
18. A shopping mall provides an interface between two types of customer: the retailers which lease
retail stores and the consumers that shop at these stores. Hence a shopping mall may be regarded as a
platform.
[See p.258]
19. Where different technological solutions compete to establish a de facto technical standard, the
winner is usually best technology.
[See p.260]
20. The main lesson learned from the standards wars involving VHS and Betamax in VCRs and
between the Apple Mac and IBM PC in personal computers was that liberal licensing of technology is
the key to building market leadership.
[See pp.260-261]
21. Open innovation is based upon the assumption that although there are huge gains form
collaborative knowledge sourcing; these gains can be outweighed by risks outsiders expropriating
one’s own knowledge.
[See p. 265]
22. Recognition tends to be more effective at motivating innovation than financial rewards.
[See p.263]
Multiple Choice Questions
23. The 1949 quotation that “computers in the future may…weigh only 1.5 tons” indicates:
[See p.241]
24. The difference between invention and innovation is:
[See p.243]
25. Which of the following statements about the relationship between innovation and invention are
correct?
[See p.243]
26. During recent years, the cycle of innovation (from initial knowledge generation to final diffusion)
has:
[See p.244]
27. An innovator’s ability to derive profit from an innovation depends primarily upon:
[See pp.244-245]
28. An innovator may fail to earn any significant returns from an innovation if:
[See pp.244-248]
29. The personal computer created a huge amount of value for users. The companies that profited most
from the personal computer were:
[See p.245]
30. The following industry offers a strong regime of appropriability for innovators:
[See pp.245-246]
31. The intellectual property of a firm comprises:
[See p.246]
32. The main factor that determines the relative effectiveness of the different instruments used to
protect property rights depends on:
[See p.249
33. The distinction between codifiable and tacit knowledge is important in relation to property rights
protection because:
[See p.247]
34. Lead-time refers to:
[See p.247]
35. A company may seek to patent an invention even if it has no intentions of commercializing it.
Which of the following is not an important reason for such strategic patenting?
[See pp.249-250]
36. An innovation’s complexity impacts:
[See p.247]
37. If technological breakthroughs increase the feasibility and attractiveness of fuel cells as a means of
propulsion for vehicles, the profits that can be earned from the developers of the fuel cell technology
will be limited by:
[See p.248]
38. Patents protect innovation better than any mechanism.
[See p.249]
39. Which of the following factors does not contribute to the attractiveness of licensing provides as a
means of exploiting an innovation:
[See pp.250-251]
40. Comparing the development of xerography and the jet engines to satellite-based global positioning
(GPS) and MP3 music players illustrates that:
[See pp.243-244]
41. Monsanto’s NutraSweet artificial sweetener, Pfizer’s Viagra, and Pilkington’s float glass process
are innovations that are examples of:
[See p.246-249]
42. A firm has an innovation that has weak patent protection but its exploitation requires a number of
complementary resources that it does not possess. Its best mode of exploiting the innovation is likely ot
be:
[See pp.250-251]
43. The choice of being a leader or a follower in innovation should depend on:
[See pp.252-253]
44. When entering a new product market with an innovative product, an established company should
select the optimal time of entry based upon:
[See pp.252-253]
45. When reliable forecasting is not available, risk can be managing implemented through:
[See pp.254-255]
46. Cooperation with lead users is a useful tool of innovation management because:
[See pp’254-255]
47. In digital markets, once a company is losing a standards war, its best strategy may be:
[See pp.259-261]
48. Standards are important in an industry because:
[See pp.259-260]
49. Cooperation with lead users is a useful tool of innovation management because:
[See pp.254-255]
50. The principal difference between public and private standards is:
[See pp.255-256]
51. It may be preferable for government to intervene to impose a public standard rather than let a
private, de facto standard be determined through competition because:
[See p.256]
52. “Network externalities” refer to:
[See p.257]
53. Network externalities in smartphones arise primarily from:
[See pp.261-262]
54. When network externalities are available in a market, the typical outcome is:
[See p.257]
55. In video cassette recorders (VCRs), Matsushita’s VHS format won against Sony’s Betamax format
because:
[See p.260]
56. The market share leadership in smartphone operating systems possessed by Google’s Android
operating system reveals:
[See pp.260-261]
57. “Creative abrasion” can facilitate product development through:
[See p.263]
58. Cross functional product development teams, product champions, and incubators are organizational
devices used:
[See p.266-268]