Deck 9: Technology-Based Industries and the Management of Innovation

Question 1

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.

Answer 1

False

Question 2

Invention and innovation are essentially the same.

Answer 2

False

Question 3

Where different technological solutions compete to establish a de facto technical standard,the winner is usually best technology.

Answer 3

False

Question 4

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

Question 5

Being the leader in introducing an innovation to the market is usually better than being a follower.

Question 6

Network externalities exist when the value of a product to an individual depends on the number of other users.

Question 7

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.

Question 8

In the markets for digital products,"platforms"-the interfaces within two-sided markets are typically based upon operating systems.

Question 9

The history of innovation supports Emerson's prediction that superior technology ("a better mousetrap")is usually translated into success in the commercial marketplace.

Question 10

Across most industries patents offer the greater protection to product innovations than to process innovations.

Question 11

Empirical research shows that for both product and process innovations,patents are more effective at protecting innovation than secrecy.

Question 12

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.

Question 13

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.

Question 14

A standard is a format or interface that allows interoperability.

Question 15

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

Question 16

'Freedom to design' refers to firms' ability to use each other's patents through a comprehensive cross licensing agreement

Question 17

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.

Question 18

Research shows that across firms,R&D intensity and frequency of new product introductions is positively correlated with profitability

Question 19

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.

Question 20

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

Question 21

During recent years,the cycle of innovation (from initial knowledge generation to final diffusion)has:

A)Got faster
B)Got slower
C)Become more global
D)Become more uncertain

Question 22

An innovator may fail to earn any significant returns from an innovation if:

A)The innovation fails to create value for users.
B)The innovator is unable to appropriate the value the innovation creates.
C)Both (a)and (b)are present.
D)If either (a)or (c)is present.

Question 23

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:

A)The greater environmental attractiveness of battery-powered electric vehicles
B)The dependence of fuel cell technology on specialized investments by auto makers in designing new cars and fuel suppliers in supplying hydrogen refueling facilities
C)The likely ineffectiveness of patents relating to fuel cells
D)Lack of interest in vehicle owners in fuel cell technology

Question 24

An innovator's ability to derive profit from an innovation depends primarily upon:

A)Factors that prevent would-be competitors from imitating the innovation.
B)The strength of the patents that protect the innovation.
C)The innovator's ability to manufacture and market the innovation.
D)The innovator's financial resources.

Question 25

The 1949 quotation that "computers in the future may…weigh only 1.5 tons" indicates:

A)Engineers are generally very poor at forecasting.
B)It is difficult to forecast the development of technology more than a few years ahead.
C)The lack of communication among technologists-the transistor had been invented in 1947.
D)The acceleration of technological change during the second half of the 20^th century.

Question 26

Lead-time refers to:

A)The period of time during which a firm is the leader of an industry
B)The period of time during which a firm has discovered the largest number of innovations
C)The time it takes followers to catch up
D)None of the above

Question 27

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.

Question 28

The difference between invention and innovation is:

A)Invention requires an inventor,innovation requires no individual person.
B)You must innovate before you invent.
C)Invention is the creation of a new device or process,innovation is its commercialization .
D)An invention can be patented and hence earn royalties.

Question 29

The following industry offers a strong regime of appropriability for innovators:

A)Financial services.
B)Processed food products.
C)Pharmaceuticals.
D)Handheld mobile devices.

Question 30

Recognition tends to be more effective at motivating innovation than financial rewards.

Question 31

The main factor that determines the relative effectiveness of the different instruments used to protect property rights depends on:

A)The legal system of the country in which the firm resides
B)The effectiveness of the firm's lawyers
C)How much competition the firm faces
D)The characteristics of the innovation that is being protected

Question 32

The personal computer created a huge amount of value for users.The companies that profited most from the personal computer were:

A)The innovators
B)The followers
C)The suppliers
D)None of the above

Question 33

The distinction between codifiable and tacit knowledge is important in relation to property rights protection because:

A)Both types of knowledge are present in innovations
B)Patents must be written clearly and in an accurate way,so that they only contain codifiable knowledge
C)If an innovation is not described and embedded in a written form,it cannot be effectively protected
D)In the absence of legal protection,the extent to which an innovation can be imitated depends on the ease with which the technology can be comprehended and communicated

Question 34

Patents protect innovation better than any mechanism.

A)A century of evidence shows this is true
B)No one can confirm or disprove this statement
C)The evidence is mixed
D)Evidence shows that in most industries this is not true

Question 35

Which of the following statements about the relationship between innovation and invention are correct?

A)Invention is often the result of an individual's efforts; innovation typically involves business organizations.
B)Intellectual property law offers greater protection to innovation than to invention.
C)Complementary resources are more important in supporting invention than in supporting innovation.
D)Invention requires genius,innovation requires practical insight.

Question 36

Comparing the development of xerography and the jet engines to satellite-based global positioning (GPS)and MP3 music players illustrates that:

A)Invention always precedes innovation
B)Financial resources are critical to introduce successful innovations
C)The innovation cycle has speeded up over time
D)Digital technology has fundamentally changed the nature of innovation

Question 37

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?

A)To block competitors' opportunities for innovation
B)To generate licensing revenue
C)To increase the company's bargaining power when negotiating cross-licensing deals with other companies
D)To increase the reputation of company's R&D department

Question 38

An innovation's complexity impacts:

A)The ease with which it can be copied
B)The resources needed to formalize it and to establish a patent to protect it
C)The rate of diffusion of the innovation,and its acceptance by customers
D)The probability for a firm to innovate

Question 39

Which of the following factors does not contribute to the attractiveness of licensing provides as a means of exploiting an innovation:

A)The innovating firm possesses most of the complementary resources needed to exploit the innovation
B)Patent are strong
C)The potential for the innovation to enhance the performance of existing products has been clearly demonstrated
D)The innovation has potential applications is several different industries

Question 40

The intellectual property of a firm comprises:

A)Copyright and patents
B)Patents,trademarks,copyrights,trade secrets,and goodwill
C)The total of its intangible assets
D)Patents,trademarks,copyrights,and trade secrets

Question 41

When reliable forecasting is not available,risk can be managing implemented through:

A)Alertness
B)Responsiveness
C)Avoiding large scale commitment
D)All of these

Question 42

Cross functional product development teams,product champions,and incubators are organizational devices used:

A)By top managers to control the technological development of their firms
B)To reconcile the conflicting requirements of operations and innovation
C)To build new organizational structures,inspired by innovation in high-tech industries
D)To reconcile coordination and specialization needs

Question 43

The principal difference between public and private standards is:

A)Standards set by public firms vs.standards established by privately-owned companies
B)Standards established by governments vs.standards set by companies
C)Standards available for all organizations and industry players vs.standards owned by firms or individuals
D)Free standards vs.standards users have to pay for

Question 44

Cooperation with lead users is a useful tool of innovation management because:

A)Lead users set the trend for the mass market
B)Due to their price insensitivity,lead users tend to be the most profitable customers
C)Lead users provide both information feedback and revenues that can assist ongoing product development
D)Because lead users are so discerning,they have a key role in providing both discipline and incentives

Question 45

In video cassette recorders (VCRs),Matsushita's VHS format won against Sony's Betamax format because:

A)VHS was technically superior to Betamax
B)VHS VCRs were cheaper than Betamax VCRs
C)Matsushita's licensing of its VHS format to other manufacturers of VCRs led to its gaining a lead in market share
D)Sony entered the market too early

Question 46

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:

A)Licensing.
B)Joint venture.
C)Internal commercialization.
D)Acquiring a company that does possess the required complementary resources.

Question 47

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:

A)Governments are superior to markets in selecting the best technology
B)A private,de facto standard can take a long time to become established,thereby delaying the adoption of a new technology
C)Competition is always wasteful
D)De facto standards tend to be set by US companies

Question 48

Monsanto's NutraSweet artificial sweetener,Pfizer's Viagra,and Pilkington's float glass process are innovations that are examples of:

A)Weak regimes of appropriability because the innovations could not be patented
B)Strong regimes of appropriability because of the effectiveness of patent protection
C)Strong regimes of appropriability because the innovators possessed strong complementary resources
D)Network externalities leading to a winner-take-all market

Question 49

In digital markets,once a company is losing a standards war,its best strategy may be:

A)Exit before it loses even more money
B)Apply additional resources ot courting supporters
C)Go open source
D)Seek alliances

Question 50

The choice of being a leader or a follower in innovation should depend on:

A)The extent of legal protection of the innovation,the nature of the knowledge involved,and the potential to establish a standard
B)The development cost of the innovation,the importance of complementary resources,and the profitability of the industry in which the innovation is to be applied
C)The extent of protection of the innovation,the potential to establish a standard,and the importance of complementary resources
D)The potential to establish a standard,the relative powers of the other players in the industry,and the development cost of the innovation

Question 51

The market share leadership in smartphone operating systems possessed by Google's Android operating system reveals:

A)It's generally better to be a follower than a first mover.
B)In digital markets where network externalities are present,Google's huge user base typically gives it a huge advantage over rivals.
C)Where network externalities are present,an open source strategy can often be effective in undermining a competitor's market share lead.
D)Strength in complementary resources and capabilities can allow a strong company to overcome the initial lead of an early innovator.

Question 52

When network externalities are available in a market,the typical outcome is:

A)A winner-take-all market
B)Monopolistic abuse requiring antitrust intervention
C)More rapid technological innovation
D)Lack of consumer choice

Question 53

Cooperation with lead users is a useful tool of innovation management because:

A)Lead users set the trend for the mass market
B)Due to their price insensitivity,lead users tend to be the most profitable customers
C)Lead users provide both information feedback and revenues that can assist ongoing product development
D)Because lead users are so discerning,they have a key role in providing both discipline and incentives

Question 54

"Creative abrasion" can facilitate product development through:

A)Creating a work environment of aggressive individualism
B)Providing strong financial i9ncnetives for individual creativity
C)Establishing a professional setting in which development teams abandon social conventions of respect and mutual support in order to critique their current efforts
D)Subjecting technologists and engineers to criticism from rank-and-file employees

Question 55

Standards are important in an industry because:

A)They allow interoperability and industry growth,and are linked with network externalities
B)They are established by the dominant player in the industry
C)They are imposed by the government and have the force of law behind them
D)High-tech industries are the only industries that cannot effectively function without standards

Question 56

"Network externalities" refer to:

A)The benefits that firms derive from using social networks (such as Facebook and Google+)in their marketing
B)The value that the user of a product derives from the number of other users of the same product
C)The costs and benefits that are borne by or received by society as a result of the actions of a business enterprise
D)The consequences of platform-based competition

Question 57

Network externalities in smartphones arise primarily from:

A)Direct user-to-user externalities
B)The availability of complementary products
C)The popularity of the Apple iPhone
D)Google's decision to make its android operating system open source

Question 58

When entering a new product market with an innovative product,an established company should select the optimal time of entry based upon:

A)The principle that early-mover advantage is the key to success in new markets
B)Recognition that risk is reduced by waiting to see how technology and customer requirements will shape the emerging industry
C)Trading off early mover advantages against the benefits of waiting to the point when an established firm's resources and capabilities can maximize their effectiveness
D)The potential to exploit network externalities in order to establish a dominant standard