Chapter 6

Regarding de facto standards, a "tipping point" is when: a. A certain threshold of market share is reached, beyond which it just keeps rising irreversibly b. The market losers basically have to "tip" their excess product away c. It's as though the market losers "tip" their market shares into the winner's bag d. Customers finally realise who has the best product

a. A certain threshold of market share is reached, beyond which it just keeps rising irreversibly

The main examples of property rights with regard to innovations are: a. Copyrights, patents, and trademarks b. Patents, goodwill, and trademarks c. Know-how, skills, and trade secrets d. Trademarks, copyrights, and tangible assets

a. Copyrights, patents, and trademarks

Competitive advantage and technology are linked by: a. Innovation b. Corporate culture c. Invention d. Organizational culture

a. Innovation

The main advantage of licensing as a strategy to exploit innovation is: a. It requires little involvement in complementary resources by the innovator b. It's a way to operate as a virtual company c. It saves on costs, so is vastly more profitable for the innovator d. It's always successful and highly profitable

a. It requires little involvement in complementary resources by the innovator

Risk in emerging industries is created by the following factors: a. Market and technological uncertainties b. Market and cost uncertainties c. Rivalry and political uncertainties d. Customer tastes and technology development costs

a. Market and technological uncertainties

The cycle of innovation has recently: a. Speed up b. Slowed down c. Become more aggressive d. Become more uncertain

a. Speed up

Where they exist, network externalities are critical phenomena because: a. They create positive feedback which often leads to a winner-takes-all situation b. They create a winner-takes-all situation which is unfair from a competition standpoint c. Technological innovations tend to be resilient d. Governments are more and more concerned with supporting networks

a. They create positive feedback which often leads to a winner-takes-all situation

Standards are important in an industry because: a. They underpin interoperability (where relevant) and facilitate industry growth b. Every industry needs a market leader c. They are imposed by the government and have the force of law behind them d. Most industries cannot effectively function without standards

a. They underpin interoperability (where relevant) and facilitate industry growth

The only way to cope with true uncertainty is: a. To be flexible enough to quickly react to the unexpected b. Prepare multiple scenario plans c. To construct a computer model simulation d. To calculate all the risks and analyse the chances of success in a spreadsheet model

a. To be flexible enough to quickly react to the unexpected

A major constraint for start-up innovators is that they are unlikely to possess sufficient complementary resources for exploiting their innovation. a. True b. False

a. True

Advantages are likely to accrue to accrue to a firm that is a first mover in a market where technical standards are important a. True b. False

a. True

An innovation is more likely to diffuse more quickly throughout an industry if it is perceived as worth imitating by competitors. a. True b. False

a. True

An innovation which comes to dominate the market does not always lead to superior profits for the innovator. a. True b. False

a. True

Having a patent is not much use if a rival is expert enough to quickly come up with an alternative way to achieve the same thing. a. True b. False

a. True

Innovation must involve the attempted commercialisation of a new invention, or new idea. a. True b. False

a. True

It's wise to manage the creative departments in a firm separately from the operational departments. a. True b. False

a. True

Network externalities lead to positive feedback, so that products tend to rapidly coalesce to an industry standard. a. True b. False

a. True

Property rights in innovation mainly include; patents, trademarks and copyright. a. True b. False

a. True

Regarding innovations, complementary resources are all the other things apart from the invention or idea necessary to achieve commercial success. a. True b. False

a. True

The "regime of appropriability" refers to the extent to which the innovator can appropriate value i.e. make a profit. a. True b. False

a. True

The risk of failure of an innovation is a combination of technological risk and market risk. a. True b. False

a. True

Creative activities require different organizational structures and management systems than operational activities so balancing creativity with commercial success is best achieved by : a. establishing cross-functional teams b. having a hierarchical structure with a clear line of command c. having tight targets and performance measurement d. Both b and c

a. establishing cross-functional teams

The essence to winning a standards war is: a. Having the best technology b. Building a strong market presence, and some powerful allies - complementers and leading customers c. Owning the most intellectual property d. Simply being the first in the market

b. Building a strong market presence, and some powerful allies - complementers and leading customers

Firms innovate because: a. The human race is naturally inventive b. Competitive advantages tend to erode over time - so new ones need to be found c. Consumers are always looking for the next new gadget d. It gets boring doing the same old things

b. Competitive advantages tend to erode over time - so new ones need to be found

The difference between "evolutionary" and "revolutionary" standards strategies is: a. Revolutionary strategies are more dramatic, and so more effective b. Evolutionary strategies maintain compatibility with what went before c. Revolutionary strategies are more likely to gain investor attention d. Revolutionary strategies show greater determination and commitment

b. Evolutionary strategies maintain compatibility with what went before

Close co-operation with a major potential customer during innovation development is inadvisable, in case they copy the innovation themselves. a. True b. False

b. False

If a firm or a person secures a patent, then commercial success is assured. a. True b. False

b. False

Most inventions are based on new technology. a. True b. False

b. False

Only digital technology is of interest outside of the science-based industries. a. True b. False

b. False

Technology is not very important to established, mature industries. a. True b. False

b. False

The main factors in determining whether the innovator can make a good profit from an innovation are luck, and good timing. a. True b. False

b. False

Those firms who spend more on research and development are nearly always more successful at making profit from innovation. a. True b. False

b. False

Which exploitation strategy is best for an innovation depends entirely on whether the innovator prefers to licence out the underlying patent or copyright. a. True b. False

b. False

To determine the amount of the value created by an innovation that can be appropriated by the innovator, four factors are critical: a. Complementary resources, the tacitness and complexity of the technology, corporate culture, and human resource management b. Property rights, the tacitness and complexity of the technology, lead-time, and complementary resources c. The tacitness and complexity of technology, lead-time, excellence of top management teams, and luck d. Lead-time, complementary resources, relative bargaining power, and structure of the industry

b. Property rights, the tacitness and complexity of the technology, lead-time, and complementary resources

To win a standard war, a firm often needs to: a. First identify the future standard and then assemble allies to win b. Share the value created by its technology with third parties c. Wait, and try to network and lobby the government authorities d. Increase marketing and advertising

b. Share the value created by its technology with third parties

Inventions are: a. The creation of new products based on new technology b. The creation of new products or processes, often based on existing technology and know-how c. Usually the outcome of several decades of research d. Usually the outcome of individual scientists or engineers, working alone

b. The creation of new products or processes, often based on existing technology and know-how

One of the common problems with licensing is: a. Licensees often seek to imitate the innovation themselves b. The innovator is wholly dependent on the licensee's commitment and effectiveness c. The innovator cannot issue another licence d. Licensees are often bad payers

b. The innovator is wholly dependent on the licensee's commitment and effectiveness

Network externalities exist when: a. The value of a product for a customer lies in how many others he can connect to b. The value of a product for a customer depends significantly on the number of other users of the same product c. There are large benefits to other customers d. There are huge drawbacks for other customers

b. The value of a product for a customer depends significantly on the number of other users of the same product

Small start-up firms without complementary resources often forge ahead as first-movers anyway because: a. They are naïve and foolhardy b. They often have no choice c. By definition they are risk-takers d. They are backed by huge amounts of venture capital funding

b. They often have no choice

De facto standards suffer from the following weakness: a. They are characterized by uncertainty b. They tend to emerge slowly and / or haphazardly c. They are characterized by high development costs d. Rivals may not accept them and fight against their adoption by the industry

b. They tend to emerge slowly and / or haphazardly

If a strong regime of appropriability exists, the innovator: a. Cannot capture a significant portion of the created value b. Cannot acquire the property rights of its innovation c. Can capture a significant portion of the created value d. Should try to sell its innovation to a large firm

c. Can capture a significant portion of the created value

The choice of a strategy to exploit innovation depends on two factors: a. Luck and past experience in the industry b. Characteristics of the innovation and a firm's financial resources c. Characteristics of the innovation and a firm's resources and capabilities d. The nature of the innovation, and how large the firm is

c. Characteristics of the innovation and a firm's resources and capabilities

If complementary resources are provided by third-parties, then the level of profit accruing to the innovator: a. Depends on how reliable the outsource companies are b. Depends on how commercially aggressive the innovator is c. Depends on how non-specialised the outsourced functions can be d. Depends on a good contracts negotiator, preferably a lawyer

c. Depends on how non-specialised the outsourced functions can be

Cooperation with lead users is: a. A risk because they may imitate the innovation themselves b. A burden to costs and times the time of key people, so is best avoided unless they insist c. Essential in some cases to ensure development follows a path which customers actually want d. Useful because it makes the customer feel important

c. Essential in some cases to ensure development follows a path which customers actually want

Public versus private standards are respectively: 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 versus standards owned by firms or individuals d. Free standards versus standards users have to pay for

c. Standards available for all organizations and industry players versus standards owned by firms or individuals

Innovation no guarantee of success and fortune for the innovator because: a. Success depends on the value created b. Implementation of innovation may be a failure due to internal organizational factors c. Success depends on sufficient value being created and a sufficient portion of that value being appropriated by the innovator d. Nothing is guaranteed in the corporate world and in life in general

c. Success depends on sufficient value being created and a sufficient portion of that value being appropriated by the innovator

The determinants of the choice between a leader versus a follower strategy are: a. The extent of 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 shape of the economy c. The extent of the 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

c. The extent of the protection of the innovation, the potential to establish a standard, and the importance of complementary resources

A classic example of positive network externalities, illustrating that the value of a product is a direct function of the number of users, is: a. Fashion items b. The automobile c. The telephone d. Public transport, such as the train

c. The telephone

Lead-time in the context of innovation refers to: a. The period of time during which a firm is the leader of an industry b. The period of time it takes for equipment to arrive after it's been ordered c. The time it takes a follower to catch up d. The time it takes for a competitor to realise you've done something innovative

c. The time it takes a follower to catch up

An innovation diffuses: a. Mainly on the supply side b. By industrial espionage and leaked information c. Through the purchase of products by customers and the imitation by competitors d. Answers b and c

c. Through the purchase of products by customers and the imitation by competitors

Invention and innovation: a. are interchangeable terms- they mean the same b. are different, unrelated concepts c. are linked concepts. Innovation is the commercialisation of invention d. Largely a matter of personal opinion

c. are linked concepts. Innovation is the commercialisation of invention

In the past decade the impact of technology has: a. Been limited to science-based industries b. Been limited to digital technologies c. been pervasive, in particular because of the influence of digital electronics technologies d. Overwhelmingly been about social networking services

c. been pervasive, in particular because of the influence of digital electronics technologies

Technological uncertainty means: a. Uncertainty as to which technical standards will be adopted or emerge b. The uncertainty from it not being possible to predict how long it may take or even whether a technical problem will be solved c. The uncertainty of whether a rival is secretly developing the same technology more quickly d. All of the above

d. All of the above

When complementary resources are critical to the market success of an innovation: a. The technical risks are relatively unimportant b. The costs and risks are amplified c. A larger firm with established complementary resources is better placed than a start-up d. Answers b and c

d. Answers b and c

The value created by an innovation is: a. Shared equally among the players b. Determined by customer loyalty c. Captured by the player possessing the largest market share of the industry d. Distributed amongst the various players involved in no certain way

d. Distributed amongst the various players involved in no certain way

Complementary resources include: a. Ancillary products b. Give-away promotional products such as free pens, mouse mats etc. c. Bundled products. For example, for a PC, what software is included in the package d. Financial, production, sales and marketing resources needed to gain market success

d. Financial, production, sales and marketing resources needed to gain market success

The extent to which an innovation can be imitated by a competitor depends on: a. Whether the competitors' experts are as clever as our experts b. Whether a competitor can get a photocopy of the patent details c. How ruthless the competitor is d. How possible it is for the competitors' experts to comprehend, codify and replicate the technology

d. How possible it is for the competitors' experts to comprehend, codify and replicate the technology

Nowadays, it makes no sense for an innovator to do everything themselves because: a. This is an outmoded way of operating b. It's always cheaper to outsource c. The world is just too complex in the 21st century d. None of the above. It may make every sense

d. None of the above. It may make every sense

A patent is usually the best protection for an innovation. a. This statement is correct b. No one can confirm or disprove this statement c. It depends d. This statement is incorrect

d. This statement is incorrect

Creativity requires management systems that: a. are quite different from those appropriate for promoting efficiency b. offer individuals considerable freedom and flexibility c. embrace diversity d. all of the above

d. all of the above