Managers choose a local-for-local approach to innovation when they have a strong
desire to control the evolution of a technology.
In Prahalad and Hamel’s model, it is possible for a firm to develop core competencies to
a set of abilities that enable it to quickly reconfigure its organizational structure and
routines in response to new opportunities.
From a real options perspective, the value of a call stock option is zero as long as the
price of the stock is more than the exercise price.
A lack of cross-functional communication can lead to a poor fit between product
attributes and customer requirements.
In globally linked strategies to innovation, R&D divisions are centralized.
All pioneers face customer uncertainty.
Technologies always get the opportunity to reach their performance limits before being
replaced by a new technology.
When a technology’s performance is plotted against the amount of effort and money
invested in the technology, it typically shows slow initial improvement, then accelerated
improvement, then diminishing improvement
A technology may be underdeveloped and its fit with customer needs unknown in the
early market stages.
If a firm codifies all of its activities with detailed procedures, it may stifle employee
creativity.
Marketing channels that enable high content and selective reach are appropriate for
innovators and early adopters.
In the context of s-curves in technological improvement, performance improvement in
the early stages of a technology is rapid.
If a tobacco farmer invents a new plant that one can smoke without experiencing any
negative health effects and can be asexually reproduced, then he or she can receive a
plant patent for it.
If a firm’s objective is maximum market skimming, it will initially set a high price on
new products.
Between two technologies competing for dominance, when customers attain their
desired level of network externality benefits at lower market share levels:
a. it implies that one specific technology clearly dominates
b. they face a relatively small indifference region.
c. the network externality returns curves flatten out sooner.
d. it implies that both the technologies cannot successfully coexist.
Fashion Fair, the first mover in the “all year discount” stores market, lost its market
share to a late entrant-Brand Fair. Brand Fair operated its discount stores solely over the
Internet, which, in turn, saved a lot of expenses. However, Fashion Fair was unable to
adopt the online store business model due to its existing contracts with suppliers and
investment in a physical infrastructure. This is an example of:
a. incumbent inertia.
b. monopoly rents.
c. path dependency.
d. technology spillover.
In a survey, Sam was asked to rank on a scale of 1 to 5 how important different cell
phone features were to him. The result was then used by the surveying firm to assess
the different attributes of the ranking. This survey can be called a(n) _____ analysis.
a. attribute
b. functional
c. comparative
d. conjoint
Which of the following is true of functional teams?
a. Functional teams consist of members from multiple areas in the firm such as R&D,
marketing, manufacturing, distribution, and so on.
b. The functional team structure provides little opportunity for cross-functional
coordination.
c. Functional teams are not appropriate for derivative projects that affect only a single
function.
d. Functional teams are usually permanent.
According to Michael Porter’s model of a value chain, which of the following is a
support activity?
a. Accounting activities
b. Outbound logistics
c. Marketing
d. Inbound logistics
Electronic waste results from the disposal of technological goods. This is an example
of:
a. the opportunity cost borne by the companies.
b. a negative externality.
c. a negative variance.
d. the innovation funnel.
If _____ is high, firms will have to enter a market early.
a. threat of competitive entry
b. entry barrier
c. inability to improve previous technology
d. customer ambiguity
When Pearl Love introduced its new range of body wash, consumers switched from
using soaps, sold under the same brand, to its new body wash. As a result, the company
experienced a sharp drop in its soap sales. This is best known as:
a. cannibalization.
b. the vampire effect.
c. the halo effect.
d. vaporware.
Screening questions are used mainly to:
a. involve people in the decision.
b. structure the discussion about project details like potential costs and benefits.
c. weed out illegal ideas.
d. choose the best consulting firm to analyze a potential project.
Henry calculated that the net present value of his investment would be zero with a 15
percent internal rate of return. This means that:
a. the project has no value.
b. Henry can compare the 15 percent internal rate of return to the required rate of return
to determine if the investment should be made.
c. the project requires an additional 15 percent investment by the company.
d. the project will break even in 15 years.
Alumplus Aluminum Company has come up with a new type of metal. However,
producing it would take up 75 percent of its manufacturing capacity and would hinder
its ability to continue producing its other products. Alumplus Aluminum hires LM
Group of Manufacturers to manufacture the new type of metal. This collaborative
arrangement is most likely to be classified as _____.
a. outsourcing
b. disintermediation
c. capability complementation
d. solo internal development
Which of the following is true of innovators and early adopters?
a. They are unwilling to take risks and to pay high prices.
b. They may demand considerable customization and technical support.
c. They are more likely to respond to marketing that communicates the product’s
completeness.
d. For this market segment, detailed technical information is not as important as using
market channels with high reach and high credibility.
ErgoWorld manufactures office furniture. The company is considering adopting a
modular production system. A modular system offers greater value to ErgoWorld when:
a. most customers are likely to agree on a single product configuration.
b. customers prefer to upgrade their products by replacing their entire system.
c. customers are willing to pay a premium price for extreme customization and
personalization.
d. customers have heterogeneous demands which are expected to be met in a
cost-effective way.
Which of the following is the property right that most effectively protects works of
authorship?
a. Patents
b. Embargoes
c. Copyrights
d. Trademarks
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
Gerden Price Co. and New Ware Systems formed an alliance to develop a new line of
technologically advanced cooking stoves. What outcomes can they expect from this
alliance?
a. Getting the product to the market faster
b. Increased security of proprietary knowledge
c. Lesser opportunities to pursue other projects
d. Fewer resources to cope with contingencies
A bicycle manufacturing company adopted a new type of inventory management
system. This inventory system improved the productivity of its manufacturing unit and
the quality of the bicycles. This is an example of _____ innovation.
a. product
b. radical
c. architectural
d. process
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 belongs to the group of:
a. early majority.
b. early adopters.
c. innovators.
d. laggards.