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

Question 1

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

Answer 1

False

Question 2

Invention and innovation are essentially the same.

Answer 2

False

Question 3

The primary consideration in managing the risks of innovation is minimizing commitments in order to maximize flexibility.

Answer 3

True

Question 4

The network externalities that support eBay's dominance of the market online auctions are primarily the result of user-based network effects.

Question 5

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

Question 6

In the markets for digital products,"platforms"-the principal type of interface within two-sided markets is an operating system.

Question 7

A standard is a format or interface that allows interoperability.

Question 8

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 9

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 10

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.

Question 11

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

Question 12

Willie Wonka's (Charlie and the Chocolate Factory)commitment to secrecy suggests that his innovative candies probably lacked patent protection.

Question 13

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

Question 14

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

Question 15

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 16

The ability of an innovating firm to appropriation of returns to its innovation is wholly dependent on establishing property rights in the innovation

Question 17

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

Question 18

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

Question 19

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 20

It is difficult to be successful as a first mover unless your innovation has strong patent protection.

Question 21

If technological breakthroughs increase the feasibility 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 22

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 23

Comparing the development of the jet engine to satellite-based global positioning (GPS)and instant messaging 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 24

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 25

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 26

An organization's capacity for innovation depends primarily on the innate creativity of the people within the organization rather than the organization's internal environment.

Question 27

The main factor that determines the relative effectiveness of patents in protecting an innovator is:

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 28

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 29

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

Question 30

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 prediction fails to recognize that the transistor had been invented in 1947
D)The acceleration of technological change during the second half of the 20^th century.

Question 31

The principal 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 32

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 33

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 34

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

Question 35

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 36

The distinction between codifiable and tacit knowledge is relevant to a firm's ability to appropriate the returns to its innovation because:

A)Technological progress involves advances in codifiable knowledge-hence it is more important
B)Patents and copyrights must be articulated clearly-hence they embody only codifiable knowledge
C)Tacit knowledge related primarily to traditional skills that are becoming increasingly irrelevant in today's digital economy
D)If an innovation lacks legal protection,then,if it based on tacit knowledge it cannot be easily be imitated

Question 37

Open innovation is based upon the assumption that although there are huge gains from collaborative knowledge sourcing;these gains can be outweighed by risks outsiders expropriating one's own knowledge.

Question 38

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 39

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)Innovation requires genius,invention requires practical insight.

Question 40

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 41

When network externalities are present 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 42

For "creative abrasion" to be effective in facilitating new product development,it requires:

A)Creating a working environment where assertive individualism is cultivated
B)Establishing strong financial incentives for individual creativity
C)Establishing forums where conventions of politeness and respect are temporarily abandoned but criticisms are directed at the product not at individuals
D)Establishing a strong sense of community so that team members are not alienated,even when they disagree

Question 43

The more an innovative product embodies multiple technologies owned by different companies:

A)The less useful are patents to the innovating firm
B)The more important it is for the innovating firm to develop capabilities that span a wide range of technologies
C)The more important it is for the innovating firm to possess a strong patent portfolio that enhances its bargaining power with other technology-owning firms
D)The more difficult it is for the innovating form to launch its innovation

Question 44

A firm has an innovation that has weak patent protection,but its exploitation requires a number of complementary resources that it does not possess.It's best mode of exploiting the innovation is likely to be:

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

Question 45

In deciding when entering a new product market with an innovative product,an established company should be influenced mainly by :

A)The principle that early-mover advantage is the key to success in new markets
B)Reducing risk by waiting to see how technology and customer requirements will shape the emerging industry
C)Identifying the optimal tradeoff between early-mover and follower advantages such that the firm's resources and capabilities can be most effective
D)The potential to exploit network externalities in order to establish a dominant standard

Question 46

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 47

A common feature of the world's most valuable companies-Apple,Alphabet,Microsoft,Amazon,Tencent,Facebook,and Alibaba-in mid-2018 was:

A)They owned a platform (or platforms)
B)They possessed visionary leaders
C)They had focused on building competitive advantage in a clearly defined market
D)They had used strategic alliances to build their competitive positions

Question 48

"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 49

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 50

The argument that patents are the most effective protection for an innovation is:

A)Proven by a century of evidence
B)Impossible to confirm or disprove
C)Shown to be true only in a few industries
D)True for process innovations,but not for product innovations

Question 51

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 enhance the individual reputations of the company's leading scientists and technologists

Question 52

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 53

When reliable forecasting is impossible,the innovating firm should seek to manage risk through:

A)Committing to a well-defined strategy
B)Devotion itself to serving its customers
C)Building relations with investors
D)Avoiding commitments in order to maximize flexibility

Question 54

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 55

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 56

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 57

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 58

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 59

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 provide both discipline and incentives

Question 60

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