BADM 367 Exam 2

What are trade secrets?

Information that belongs to a business that is held private. If it offers a distinctive advantage to the company in the form of economic rents. If it remains valuable only as long as the information remains private. Must not be generally known or readily ascertainable, must have economic importance, must exercise reasonable measures to protect the secrecy of the information.

What is globally linked strategy?

Innovation activities are decentralized but also centrally coordinated for the global needs of a corporation.

What was the Paris Convention for the Protection of Industrial Property?

International intellectual property treaty adhered to by 177 countries. Citizens of any member country may patent an invention in any member countries and enjoy patent protection as if they were a citizen of the other countries.

Advantage of making decisions based on mapping an R&D portfolio?

It encourages a firm to consider both short term cash flow needs and long term stragic momentum in its budgeting and planning.

What qualifies an invention?

It must be useful, novel, and not be obvious.

What is socially complex knowledge?

Knowledge that arises from the interaction of multiple individuals.

What is tacit knowledge?

Knowledge that cannot be readily codified or transferred in written form.

Disadvantages of external development?

Lack coordination, diverse objectives, conflicting directions, redundant effort. ex) UNIX

How long does copyright protection last?

Lasts an authors life plus an additional 70 years.

What are alliance contracts?

Legally binding arrangements to ensure that partners are aware of their rights and obligations and have legal remedies if the agreement is violated.

What two things does a coherent technological innovation do?

Leverages and enhances the firms existing competitive position and it provides direction for the future development of the firm.

What is the speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, and potential for accessing other firms competencies for solo internal development?

Low High High Yes Yes No

What is the speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, and potential for accessing other firms competencies for joint ventures?

Low Shared Shared Yes Yes Yes

What is the speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, and potential for accessing other firms competencies for collective research organizations?

Low Varies Varies Yes Yes Yes

What is organic?

Low degree of formalization and standardization. May not have well defined job responsibilities and operations may be characterized by a high degree of variation.

What is the speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, and potential for accessing other firms competencies for outsourcing?

Medium/High Medium Medium Sometimes No Yes

What is data envelopment analysis (DEA)?

Method of assessing a potential project using multiple criteria that may have different kinds of measurement units. ex) utilizing a combination of cash flow estimates, a ranking of the project fit with its competencies, a ranking of project potential for building future competencies, a score for technical feasibility, and a score of customer desirability

Advantages of protections?

Offer greater rent appropriability, developers often have more money and incentive to invest in technological development, promotion, and distribution.

Advantages of diffusion?

Open technologies may accrue more rapid adoption. Larger installed base. Drive price down. May be perceived as better.

What is mechanistic?

Organization structure characterized by a high degree of formalization and standardization causing operations to be almost automatic or mechanical.

What is strategic intent?

Strategic intent is a long term goal that is ambitious, builds upon and stretched the firm's existing core competencies, and draws form all levels of the organization.

Why is strategic stakeholder analysis different from normative stakeholder analysis?

Strategic stakeholder analysis emphasizes the stakeholder management issues that are likely to impact the firm's financial performance. Normative stakeholder analysis emphasizes the stakeholder management issues the firm ought to attend to due to their ethical or moral implications.

What are quasiformal structures?

Teams, task forces, and dotted line relationships that are most problem-focused and could change faster than the rest of the company. Foster interactions based on interest instead of hierarchy. Can be hard to kill since they do not have a formal reporting structure.

What is governance?

The act or process of exerting authority and/or control. More resources at risk by collaborating the more governance imposed on the relationship.

What is capital rationing?

The allocation of a finite quantity of resources over different possible uses. ex) Sets a fixed R&D budget and then uses a rank ordering of possible projects to determine which will be funded

What are real options?

The application of stock option valuation methods to investments in nonfinancial assets.

What is digitalization?

The conversion of text, pictures, or sound into a digital form that can be processed by a computer.

What is appropriability?

The degree to which a firm is able to capture the rents from its innovation. How quickly or easily a competitor can imitate the innovation.

What is formalization?

The degree to which the firm utilizes rules, procedures, and written documentation to structure the behavior of individuals or groups within the organization.

What is net present value (NPV)?

The discounted cash inflows of a project minus the discounted cash outflows. NPV = Present value of cash inflow - Present value of cash outflows

What are the reasons a firm may choose to go solo?

1) Availability of capabilities 2) Protecting proprietary technologies 3) Controlling technology development and use 4) Building and renewing capabilities

Uniform Trade Secret Act stipulates that owners can prevent other from benefiting from this information. It states that no individual or group can copy, use, or benefit from a trade secret without owner's authorization if they meet any of what conditions?

1) Bound by duty of confidentiality 2) Nondisclosure agreement 3) Acquire through theft or bribery 4) Acquire through someone who didn't have the right to disclose it 5) Learn by mistake

Why did Joseph Schumpeter believe that larger firms would be more effective innovators?

1) Capital markets are imperfect and larger firms are better able to finance R&D 2) Larger sales volume over which to spread the fixed costs of R&D experience higher returns than firms with lower sales vilume 3) Better developed complementary activities (marketing, financial planning) 4) Greater global reach 5) Economies of scale and learning curve advantages 6) Better position to take on large or risky innovations

What are ways to foster innovation by using culture and norms?

1) Creating norms of meritocracy, flexibility, and autonomy 2) Eliminating norms of consensus 3) Solo ideation vs brainstorming groups 4) Lowering the price of failure 5) Cultivating idealistic goals

What are the components of the balanced scorecard?

1) Financial perspectives 2) Customer perspective 3) Internal perspective 4) Innovation and learning perspective

What are the primary activities of internal analysis?

1) Inbound logistics 2) Operations 3) Outbound logistics 4) Marketing and sales 5) Service

Why are larger firms not always the most efficient?

1) Loss of managerial control 2) Difficult to monitor and motivate employees 3) Incentives diminish 4) Effectiveness of governance decrease. 5) Less nimble and responsive to change 6) Bureaucratic inertia, administrative layers 7) Poor communication and coordination

What are the three key objectives of new product development process?

1) Maximizing fit with customer requirements 2) Minimizing cycle time 3) Controlling development costs

What are the support activities of internal analysis?

1) Procurement 2) Human resource management 3) Technology development 4) Infrastructure and administration

What must a firm do if a complementary good influence the value of the technology to a user?

1) Product complements in sufficient range and quantity 2) Sponsor their production by other firms 3) Encourage collective production of complements through more open technology strategy

What various methods to evaluate projects are covered?

1) Quantitative methods 2) Qualitative methods 3) Approaches that combine quantitative and qualitative methods

To be a potential source of sustainable competitive advantage what must a resource be?

1) Rare 2) Valuable 3) Durable 4) Inimitable (so good or unusual as to be impossible to copy; unique)

What are the types of collaborative arrangements?

1) Strategic alliances 2) Joint Ventures 3) Licensing 4) Outsourcing 5) Collective research organizations

What are some tips to using big data to guide innovation?

1) Treat data as assets 2) Managers must take the building and composition of the data science team very seriously 3) Differentiate between business opportunities and challenges facing the firm and the data analytics questions that your pose 4) Assess how representative, accurate, and reliable the data is

Advantages of collaborating?

1. Acquiring capabilities and resources quickly 2. Increasing flexibility 3. Learning from partners 4. Resource and risk pooling 5. Building a coalition around a shared standard

What are porters five forces?

1. Degree of existing rivalry 2. Threat of potential entrants 3. Bargaining power of suppliers 4. Bargaining power of buyers 5. Threat of substitutes

What is filing time for a patent in the US? What are filing fees?

2-5 years $1500 for a small entity, $3000 for a large entity $5000-$15000 in attorney fees

How long does a patent last in most countries?

20 years

How many core competencies is expected of a firm?

5-6

What is licensing?

A contractual arrangement whereby one organization or individual obtains the rights to use proprietary technology of another organization or individual. Typically a less expensive option than developing in house. Imposes many restrictions though

What are patent thickets?

A dense web of overlapping patents that can make it difficult for firms to compete or innovate.

What is concurrent engineering?

A design method in which stages of product development and planning for later stages of the product lifecycle occur simultaneously including maintenance and disposal. A kind of parallel development process.

What is design for manufacturing?

A development practice emphasizing manufacturing issues throughout the product development process

What is crowdsourcing?

A distributed problem solving model where a design problem or production task is presented to a voluntary group who contribute their ideas and effort in exchange for compensation.

What is conjoint analysis?

A family of techniques that enables assessment of the weight individuals put on different attributes of a choice. Enables subjective assessment of a complex decision to be decomposed into quantitative scores of the relative importance of different criteria. ex) discrete choice, choice modeling, hierarchical choice, trade-off matrices, and pairwise comparisons

What is an oligopolistic industry?

A highly consolidated industry with a few large competitors.

What is a joint venture?

A partnership between two or more firms involving a significant equity stake by the partners and often resulting in the creation of a new business entity. Requires a significant structure and commitment. Contractual arrangement is constructed.

What is a first-mover advantage?

A path-dependent advantage that cannot be copied once the firm has become the first mover in the category.

What is partly parallel development process?

A process in which some or all of the development activities at least partially overlap.

What is a patent?

A property right protecting process, machine, manufactured item, or variety of plant. Protects inventions. Utility -> new and useful process Design -> original and ornamental design Plant -> new variety of plant

What are dynamic capabilities?

A set of abilities that make a firm more agile and responsive to change.

What is agile development?

A software development methodology that delivers functionality in rapid iterations, measured in weeks, requiring frequent communication, development, testing, and delivery.

What is a loosely coupled organizational structure?

Development and production activities are not tightly integrated but rather achieve coordination through their adherence to shared objectives and common standards.

What do core competencies often combine?

Different kinds of abilities including managing the market interface (advertising, distribution), building and managing an effective infrastructure (information systems, logistics management), and tecnological abilities (applied science,process design). Also depend on high-quality relationships across different functions and business units.

What are the steps of the stage-gate process?

Discover: Idea Generation Gate 1: Idea Screen Stage 1: Scoping Gate 2: Does idea justify more research? Stage 2: Build the business case Gate 3: Is the business case sound? Stage 3: Development Gate 4: Should project be moved to external testing? Stage 4: Testing and validation Gate 5: Is product ready for commercial launch? Stage 5: Commerical launch Post Launch Review

Disadvantages of a strategic alliance?

Don't meet the goals of the partners. Don't deliver the operational or strategic benefits. Give too much information to a potential competitor.

What is capability transfer?

Exchange of capabilities across firms so partners can internalize the capabilities and use them independently of the particular development.

What is the Patent Cooperation Treaty (PCT)?

Facilitates the application for a patent in 153 countries for up to two and a half years.

What are switching costs?

Factors that make it difficult or expensive to change suppliers or buyers, such as investments in specialized assets to work with a particular supplier or buyer.

What is an ambidextrous organization?

Firm with a complex organizational form that is composed of multiple internally inconsistent architectures that can collectively achieve both short term efficiency and long term innovation.

What is architectural control?

Firms ability to determine the structure, operation, compatibility, and development of a technology. Ability to direct the future development path of the technology. Ensure compatibility with their own technology and restrict compatibility with complements produced by competitors.

What is the Icarus Paradox?

Firms prior success in the market can hinder its ability to respond to new technological generations.

What are original equipment manufacturers (OEM).

Firms that assemble goods using components made by other manufacturers also called value added resllers (VARs)

Advantages of a strategic alliance?

Flexibly combine their efforts and resources. Access to critical resources not provided in house. Better exploit their own capabilities by leveraging them in another firm's development efforts. Pool resources to share risk or collectively develop the product or market faster and less expensively.

What is a collective research organization?

Formed through government or industry association initiatives. ex) Semiconductor Research Corporation, American Iron and Steel Institute, National Center for Manufacturing Sciences, Aspla

What are go/kill decision points?

Gates established where managers must evaluate whether or not to kill the project.

What is vertical integration?

Getting into the business of ones suppliers (backwards vertical integration) or ones buyers (forwards vertical integration) ex) a firm that begins producing its own supplies has practiced backwards vertical integration, a firm that buys its distributor has practiced forward vertical integration

What are wholly open systems?

Goods based on technology that is not protected and that is freely available for production or augmentation by other producers.

What are wholly proprietary systems?

Goods based on technology that is owned and vigorously protected through patents, copyrights, secrecy, or other mechanisms. Wholly proprietary technologies may be legally produced and augmented only by their developers.

What is the speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, and potential for accessing other firms competencies for licensing out?

High Low Medium Yes No Sometimes

What is the speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, and potential for accessing other firms competencies for licensing in?

High Medium Low Sometimes Sometimes Sometimes

What are failure modes and effects analysis?

Identifies potential failures in a system and classifies them according to severity, likelihood, and detectability and plans to address them.

If the stock is worth more than the exercise price (specified price a stock is purchased at) than what does the holder do? What happens if it is worth more than the exercise price plus the price paid for the original option?

The holder will typically exercise the option by buying the stock. If it worth more than the exercise price plus the price paid the holder will make money. The opposite is true in the scenario that the stock is worth less than the exercise price.

What does it mean if the NPV is greater than 0?

The project generates wealth.

What is the efficiency frontier?

The range of hypothetical configurations that optimize a combination of features. Created using linear programming to combine different measures from the project. Can also consider which measures are inputs vs outputs and provides an efficiency value.

What is the internal rate of return (IRR)?

The rate of return yielded by a project normally calculated as the discount rate that makes the net present value of an investment equal zero.

What is R&D intensity?

The ratio of R&D expenditures to sales.

What is casual ambiguity?

The relationship between the resource and the outcome it produces is poorly understood. It is unclear how the resources gives rise to value. Very difficult to imitate. ex) talent is said to be a casually ambiguous and tacit resource

What is development cycle time?

The time elapsed from project initiation to product launch usually in months or years.

Why can IRR and NPV be deceptive?

They are only as accurate as the original estimates of the profits from the technology. They discriminate against projects that are long term or risky. May fail to capture the strategic importance of the investment decision. Can severely undervalue a development projects contribution to the firm.

How is IRR calculated typically?

Trial and error buy substituting progressively higher interest rates into the NPV equation until the NPV is driven down to zero.

What does it mean to use quantitative methods to analyze new projects?

Utilize rigorous mathematical and statistical comparisons of projects to estimate future cash return from a project. ex) discounted cash flow analysis, options analysis

What is perpetuity present value?

Utilized when cashflows are expected in forever. Perpetuity present value = C * [1/r] C = dollars per period r = discount rate

What is annuity present value?

Utilized when the cash inflows from the development project were expected to be the same each year. Annuity is a way to accumulate money to be used at some future date. We use this instead of discounting each of the cash inflows individually. Annuity present value = C * [1-[1/((1+r)^t)]]/r C = dollars per period t = period r = discount rate

What makes the value of the stock different from the value of an R&D investment?

Value of the stock is independent of the call holder's behavior but R&D investment is not independent of the investor's behavoir.

What is the speed, cost, control, potential for leveraging existing competencies, potential for developing new competencies, and potential for accessing other firms competencies for strategic alliances?

Varies Varies Low Yes Yes Sometimes

What is contract manufacturing?

When a firm hires another firm to manufacture its products. Tap the greater economies of scale and faster response time of a dedicated manufacturer, reducing costs and increasing organizational responsiveness to the environment. Can also outsource product design, process design, marketing, information technology, or distribution. Can impose significant transaction costs.

What is center for global strategy?

When all innovation activities are conducted at a central hub and then diffused throughout the company. Tightly coordinated R&D, greater specialization, protect core competencies, standardized.

What is locally leveraged strategy?

When each division or subsidiary conducts its own R&D but the firm attempts to leverage the results throughout the company.

What is local for local strategy?

When each division or subsidiary of the firm conducts its own R&D tailored for local market needs.

What is equity ownership?

When each partner contributes capital and owns a specified right to a percentage of the proceeds from the alliance. Helps to align incentives of the partners.

What is disaggregated?

When something is separated into its constituent parts. Lead to virtual organization, network organization, modular organization.

What is path dependency?

When the resource is dependent on a particular historical sequence of events.

What work cannot be copyrighted?

Work that has not been fixed in a tangible form or expression. Titles, names, short phrases, slogans, familiar symbols, and list of ingredients. ex) choreographed dance or improvisational speech that was not notated or recorded.

How did they eliminate the need to register trademarks separately in each country?

World Intellectual Property Organization administers a System of International Registration of Marks governed by the Madrid Agreement Concerning the International Registration of Marks and the Madrid Protocol.

What are the axis of a value curve?

x-axis is a list of factors that the industry competes on/invests in. y-axis indicates "high" or "low"

What is a strategic alliance?

A temporary relationship that can formalized in a contract or an informal agreement. It can be long or short term. It can include an equity investment made by the partners in each other.

What is patent trolling?

A term for when an individual or firm misuses patents against other individuals or firms in attempt to extract money from them.

Advantage and disadvantage of championing?

Advantage is stimulated communication and cooperation, assigned responsibility, compress cycle> Disadvantage is clouded judgement, optimism, bias, unwilling to kill projects.

What are advantages and disadvantages of screening?

Advantage is that a firm can consider a wider range of issues that may be important to a firm's development decisions. Disadvantage is that it does not always provide concrete answers about whether or not to fund a project.

Advantages and disadvantages of centralization?

Advantages: 1. Facilitates coordination 2. Ensures decisions are consistent with organizational objectives 3. Avoids duplication of activities by different subunits 4. Can give top level managers the means to bring about needed major organizational changes. 5. Temporary centralization of decision making power is often an important step in organizational change. Disadvantages: 1. employees feel too controlled and less flexible 2. Impede flexibility and responsiveness to change

What is an alliance?

Alliance is a general term that can refer to any type of relationship between firms. May be short or long term and may include formally contracted agreements or be entirely informal in nature.

What is an advantage and disadvantage of a DEA?

An advantage is that it enables comparisons of projects using multiple kinds of measures. A disadvantage is that is is only as good as the data utilized.

What is a trademark?

An indicator used to distinguish the source of a good. Protects words or symbols. Typically a word, phrase, symbol, design, or sound.

What is a stakeholder?

Any entity that has an interest in the organization. ex) stockholders, employees, customers, suppliers, lenders, local community, government, and rivals

What is the first step in formulating a company's technological innovation strategy?

Assess its current position and define its strategic direction for the future.

What is the most common use of conjoint analysis?

Assess the relative importance to customers of different product attributes to use these values in the development and pricing decisions. ex) rating different features and prices on a scale of 1-10 based on desirability

What are discounted cash flow methods?

Assess whether the anticipated future benefits are large enough to justify the expenditure given the risks. Take into account the payback period, risk, and time value of money. ex) Net present value, internal rate of return

What are the two dimensions a firms alliance strategy can be categorized as?

Capability complementation and capability transfer.

What is typically not patentable?

Change in material, change in size, making something more portable, substituting an element for an equivalent element, and altering the items shape. Printed material.

What is capability complementation?

Combining the capabilities and other resources of partner firms but not necessarily transferring those resources between partners.

What is the path from competency to end product?

Competency, core product, business unit, end product.

What are entry barriers?

Conditions that make it difficult or expensive for new firms to enter an industry ex) government regulations, startup costs

What is a main difference between patent and copyright protection?

Copyright protection is secured automatically when an eligible work is created an fixed in a copy or phonorecord for the first time.

How can real options terminology be utilized in R&D?

Cost of the R&D program is the price of the call option. The cost of future investment to capitalize on R&D is the exercise price. Returns to the R&D are the value.

What are exit barriers?

Costs or other commitments that make it difficult for firms to abandon an industry. ex) large fixed-asset investments, emotional commitment to the industry

What are lead users?

Customers who face the same general needs of the marketplace but are likely to experience them months or years earlier than the rest of the market and stand to benefit from solutions to those needs.

What is modularity?

Degree to which a systems components may be separated and recombined.

What is standardization?

Degree to which activities are performed in a uniform manner.

What is centralization?

Degree to which decision making authority is kept at top levels of management.

What is decentralization?

Degree to which decision making authority is pushed down to lower levels of the firm.

What is a strategic fit?

Degree to which partners have compatible objectives and styles.

What is a resource fit?

Degree to which potential partners have resources that can be effectively integrated into a strategy that creates value. Complementary or supplementary.

What was porter's five-force model original developed for and how is it typically used in practice now?

Originally to assess industry attractiveness focusing on the industry level by treating all competitors as roughly the same. Meant to determine if the industry as a whole will tend to be profitable. In practice used to assess a specific firm's external environment taking on the perspective of a particular firm and identifying ways in which the external forces differentially affect the firm vis-a-vis its competitors. Meant to identify threats and opportunities for the firm.

What are the two most commonly used tools for analyzing the external environment of the firm?

Porter's five-force model and stakeholder analysis.

What are complements?

Products or services that enhance the usefulness or desirability of another product.

What is a copyright?

Protecting works of authorship. Original artistic or literary work. Owner has the right to reproduce the work in copies or phonorecords, prepare derivative work, distribute copies by sale or transfer of ownership, perform work publicly, display work. Not a violation if used for criticism, comment, news reporting, teaching, scholarship, or research.

What is the purpose of intellectual property protection?

Provide recognition and incentive for creative work.

What is a tacit resource?

Resources of an intangible nature that cannot be readily codified. ex) knowledge

What is a socially complex resource?

Resources or activities that emerge through the interaction of multiple individuals.

What are qualitative methods for selecting projects?

Screening questions sorted by the role of the customer, role of the firms capabilities, and the projects timing and cost. Map their R&D portfolio according to the degree of change and timing of cash flows. Categorize all existing and considered projects by the resources they require and by how they contribute to the company's product line. Q-sort is a method for ranking objects or ideas on a number of different dimensions.

What is relational governance?

Self enforcing norms based on goodwill, trust, and reputation of the partners. Emerge over time through repeated experiences of working together.

Advantages of a smaller firm?

Shorter development cycles, innovative, spend more carefully.

What influences alliance selection?

Size, strength, complementarity of resources, alignment of objectives, similarity of values and culture. Breaks down into resource or strategic fit.

What is outsourcing?

Something firms may do to possess the competencies, facilities, or scale to perform all the value-chain activities for the new innovation effectively or efficiently.