CHAPTER 12

STRATEGIC ISSUES IN MANAGING TECHNOLOGY AND INNOVATION

True/False
1.
Innovation and the management of technology are not crucial to corporate success.
Answer: F
2.

The importance of technology and innovation must be emphasized by top management and
reinforced by all employees in the company.
Answer: T
3.

According to Von Hippel, suppliers accounted for 36 percent of innovations in the thermoplastics
industry.
Answer: T
4.

Lead users are companies, organizations, or individuals that are well ahead of market trends and
have needs that go far beyond those of the average user.
Answer: T
5.
The first phase of the lead user process is identifying lead users.
Answer: F
6.

Market research is used to survey current users as to what they would like in a new product.

Answer: T
7.

Strategists should assess how well company resources are internally allocated and evaluate the
organizations ability to sell technology.
Answer: F
8.
R&D intensity is a principal means of gaining market share in global competition.
Answer: T
9.

Technology sourcing, typically a sell-or-buy decision, can be important in a firms R&D strategy.

Answer: F
10.

By the 1990s, more than 150 cooperative alliances involving 1,000 companies were operating in
the United States and many more were operating throughout Europe and Asia.
Answer: T
11.

Absorptive capacity is a firms ability to value, assimilate, and utilize new external knowledge.

Answer: T
12.

The strategy/market evolution matrix depicts the types of developing products that cannot be
easily shown on other portfolio matrices.
Answer: F
13.

With the product/market evolution matrix, the circles represent the sizes of the industries
involved, and the pie wedges represent the market shares of the firms business product lines.

Answer: T
14.
The first stage of new product development is preliminary design.
Answer: F
15.

The final stage of new product development is new business development.

Answer: T
16.

According to the book Diffusion of Innovations, innovative organizations tend to have a positive
attitude toward change.
Answer: T
17.

A sponsor is usually a department manager who recognizes the value of the idea, helps obtain
funding to develop the innovation, and facilitates its implementation.
Answer: T
18.

A product champion is a person who generates a new idea and supports it through many
organizational obstacles.
Answer: T
19.
Corporate entrepreneurship is also called intrapreneurship.
Answer: T
20.

One of the thirteen best practices for improving R&D is that corporate and business unit
strategies are poorly defined and communicated.
Answer: F
Multiple Choice
21.
According to research conducted by Forbes and others, the most important driver of corporate
value for both durable and non-durable companies is said to be
a.
b.
c.
d.
e.
22.

Approximately how much of the profits of all U.S. companies come from products launched in
the previous ten years?
a.
b.
c.
d.
e.

23.

50%.
100%.
80%.
20%.
less than 1%.

According to a study conducted by Fortune, the percentage of business executives that felt their
company had lost relatively low-value customers in small market niches or low-end market
segments is
a.
b.
c.
d.
e.

24.

mass customization.
innovation.
synergy.
logistics.
flexible manufacturing.

25%.
30%.
40%.
45%.
55%.

A study by Kuczmarski & Associates revealed that _____ of all newly introduced products were
still being sold five years later.
a.
b.
c.
d.
e.

42%
48%
56%
65%
72%

25.

According to Chairman Morita, the primary philosophy for the Sony Corporation has been to
focus on
a.
b.
c.
d.
e.

26.

Information that assesses where breakthroughs are likely to occur can be depicted on a
a.
b.
c.
d.
e.

27.

Netscape
Sun Systems
Apple Computers
Cisco Systems
Corel Works

Microsoft Corporation has been able to dominate the operating system software market with the
product
a.
b.
c.
d.
e.

30.

within one's own industry.

outside one's own industry.
one's current competitors.
within one's own corporation.
Bell Labs.

The corporation _____ was able to establish itself as the industry standard for browsers.
a.
b.
c.
d.
e.

29.

technology chart.
technology strategic blueprint.
technology roadmap.
technology highway.
technology monograph.

Most new developments that threaten existing business practices and technologies come from
a.
b.
c.
d.
e.

28.

its employees.
its technology.
its plants.
its social responsibility.
its geographical location.

Corel WordPerfect.
O/S 3.0
Windows 95.
Lotus Suite.
Microsoft Word.

Automobile companies have built design centers for automotive styling in Southern California as
well as
a.
b.
c.
d.
e.

Mexico.
China.
Japan.
Italy.
Sweden.

31.

Software firms know that in order to remain on the leading edge of technology, they must have
some sort of presence in
a.
b.
c.
d.
e.

32.

Research by Von Hippel indicates that 77 percent of the innovations for various industries are
derived from
a.
b.
c.
d.
e.

33.

lead technology.
co-development.
technology customization.
developmental manufacturing.
technological continuity.

Companies, organizations, or individuals that are well ahead of market trends and have needs
that go far beyond those of the average user are known as
a.
b.
c.
d.
e.

36.

suppliers.
employees.
shareholders.
government regulators.
lobbyists.

The involvement of the customer in the commercialization of a new technology is known as

(p.281)
a.
b.
c.
d.
e.

35.

the needs of the supplier.

the needs of the employees.
the needs of the customers.
the needs of the shareholders.
the needs of the corporation itself.

Besides the users of the products, helpful advances toward innovations are derived from
a.
b.
c.
d.
e.

34.

Silicon Valley, California.

Austin, Texas.
Fayetteville, Arkansas.
New York, New York.
Los Angeles, California.

first to market benefactors.

traditionalists.
lead users.
strategic pursuers.
technological maneuvers.

The first phase of the lead user process is

a.
b.
c.
d.
e.

determining the trends.

identifying lead users.
laying the foundation.
developing the breakthrough.
hosting seminars.

37.

The effort to talk with users of the target market to understand their needs is indicative of
the phase
a.
b.
c.
d.
e.

38.

Lead user teams are typically composed of employees from the

a.
b.
c.
d.
e.

39.

one week
two weeks
three weeks
four weeks
eight weeks

A study of the impact of technological discontinuity in various industries revealed that the
leading firms failed to switch to the new technology because
a.
b.
c.
d.
e.

42.

3M
Corning
Microsoft
America Online
General Electric

For a lead user team, what is the minimum duration of each phase in the process?
a.
b.
c.
d.
e.

41.

accounting department.
marketing department.
technical department.
finance department.
marketing and technical departments.

Based on the lead user team process, what company was able to successfully implement this
process in eight of its 55 divisions?
a.
b.
c.
d.
e.

40.

determining the trends.

identifying lead users.
laying the foundation.
developing the breakthrough.
hosting seminars.

management was ignorant of the new development.

it was too expensive.
they were better able to satisfy their current customers by using the current
technology.
of government regulations.
they did studies which revealed that the new technology was inferior to the current
technology.

According to the section on market research, what company has been able to successfully use
market research in its survey of current users regarding what they would like in a new product?
(p.282)
a.
b.
c.
d.
e.

3M
Proctor and Gamble
BMW
General Motors
Chrysler

43.

According to the section on market research, what company has used market research in
directing incremental improvements to existing products?
a.
b.
c.
d.
e.

44.

According to the text, the watch maker that only retains models that sell is
a.
b.
c.
d.
e.

45.

Seiko
Microsoft
Maytag
Trilogy
3M

The consulting firm Arthur D. Little found that the use of standard market research techniques
has resulted in a success rate for new cereals of
a.
b.
c.
d.
e.

48.

embrace and extend strategy.

no change strategy.
first to market strategy.
hold strategy.
refinement strategy.

What company was cited in the text as using the embrace and extend strategy as a way to monitor
the competition for new developments?
a.
b.
c.
d.
e.

47.

Timex.
Wittnauer.
Swatch.
Seiko.
Pulsar.

Imitating new products developed by pioneers, refining them, and outmarketing the competition
is a process known as
a.
b.
c.
d.
e.

46.

3M
Proctor and Gamble
BMW
General Motors
Chrysler

over 92%.
only 8%.
around 75%.
50%.
around 25%.

What was the company Microsoft used to imitate its system in order to build the foundation for
Microsofts window operating system?
a.
b.
c.
d.
e.

Sun Systems
Unix
Netscape
Apple
Java

49.

Instead of conducting traditional market research, a number of companies are

a.
b.
c.
d.
e.

50.

What percentage of sales is spent on R&D for the computer software and drug industries?
a.
b.
c.
d.
e.

51.

incremental innovation.
novel innovation.
incentive innovation.
strategic innovation.
radical innovation.

What is the term that refers to the development of completely new products?
a.
b.
c.
d.
e.

55.

200 innovations per million employees

225 innovations per million employees
275 innovations per million employees
322 innovations per million employees
350 innovations per million employees

An extension of a product can be referred to as

a.
b.
c.
d.
e.

54.

spend twice as much as the market leader.

spend half as much as the market leader.
spend the same as the market leader.
spend at a "normal" rate for that industry.
spend whatever it takes to build market share.

What is the innovation rate of small businesses?

a.
b.
c.
d.
e.

53.

between 11% and 13%

between 2% and 5%
between 18% and 20%
between 25% and 28%
between 31% and 34%

A rule of thumb for R&D spending is that a corporation should

a.
b.
c.
d.
e.

52.

conducting untested market research procedures.

simply following what the market leader does.
probing potential markets with early versions of new products to see which have
potential.
developing new, much more sophisticated market research techniques which involve
global testing.
forming alliances to pool their research findings.

incremental innovation
radical innovation
innovative technology
manufacturing technology
flexible manufacturing

Research by Hitt, Hoskisson, and Harrison indicates that the maximum innovator in an industry
tends to be
a.
b.
c.
d.

the smallest firm.

the largest firm.
the middle-sized firm.
the newest firm.

e.
56.

Between 1950 and 1979, which countrys industry spent more money on plant maintenance and
upgrading for each ton of production capacity than did the Japanese steel industry?
a.
b.
c.
d.
e.

57.

d.
e.

logistical innovations.
product innovations.
category one innovations.
process innovations.
category two innovations.

Innovations such as new product designs and features are

a.
b.
c.
d.
e.

62.

cycle times are getting longer.

technology management is a discontinuous business.
60% of successful patented innovations are imitated within four years at 65% of the
cost of the innovation.
R&D budgets are becoming a higher proportion of total revenues in most large
corporations.
the distinction between process and product R&D is becoming blurred.

Innovations such as improved manufacturing facilities, increasing product quality, and faster
distribution, are
a.
b.
c.
d.
e.

61.

duration of innovation
time to market
time to shelf
duration of R&D intensity
span of R&D

Time to market is an important consideration in the management of technology because

a.
b.
c.

60.

continuous casting
reengineering
assembly line manufacturing
basic oxygen furnace and reengineering
basic oxygen furnace and continuous casting

What term refers to the time from inception to profitability of a specific R&D program?
a.
b.
c.
d.
e.

59.

United States
Sweden
Germany
France
Korea

What technology(ies) was the catalyst for the United States to lose its market share of the world
steel market?
a.
b.
c.
d.
e.

58.

the one with the largest R&D department.

logistical innovations.
product innovations.
category one innovations.
process innovations.
category two innovations.

Which type of innovation is important in achieving differentiation strategies?

a.

logistical innovation

b.
c.
d.
e.
63.

Which type of innovation is important in achieving cost leadership strategies?

a.
b.
c.
d.
e.

64.

30%
50%
60%
70%
80%

How much do Japanese firms spend on process R&D?

a.
b.
c.
d.
e.

69.

30%
50%
60%
70%
80%

How much do German firms spend on product R&D?

a.
b.
c.
d.
e.

68.

30%
50%
60%
70%
80%

How much do U.S. firms spend on process R&D?

a.
b.
c.
d.
e.

67.

United States
Japan
China
Germany
Finland

How much do U.S. firms spend on product R&D?

a.
b.
c.
d.
e.

66.

logistical innovation
product innovation
category one innovation
process innovation
category two innovation

Which nation is the worlds fastest growing and potentially most profitable market for bathroom
fixture manufacturers?
a.
b.
c.
d.
e.

65.

product innovation
category one innovation
process innovation
category two innovation

30%
50%
60%
70%
80%

What term is appropriate for identifying a make-or-buy decision as it relates to technology?

(p.286)
a.

technology sourcing

b.
c.
d.
e.
70.

What was the last product to be released in the major home appliance industry?
a.
b.
c.
d.
e.

71.

financial innovations.
product innovations.
technological innovations.
process innovations.
category two innovations.

Which two companies joined together to develop the microprocessor Merced?

a.
b.
c.
d.
e.

76.

venture affiliation
vertical integration
R&D outsourcing
strategic alliance
corporate entrepreneurship

The innovations which dominate the major home appliance industry are
a.
b.
c.
d.
e.

75.

Chrysler
Mazda
Cummins
Apple
Volvo

What term describes the situation where a corporation finances the costs of developing a new
technology by coordinating its R&D effort with that of other firms?
a.
b.
c.
d.
e.

74.

rational logic
fuzzy logic
multiple sensoring
category two innovation
category one innovation

To what company did Ford pay $100 million for the exclusive use of this companys truck engine
technology?
a.
b.
c.
d.
e.

73.

computer
microwave oven
DVD player
MP3 player
CD recorder

What type of process was used by Maytag to build its line of Intellisense dishwashers?
a.
b.
c.
d.
e.

72.

technology continuity
technology discontinuity
process innovation
product innovation

Microsoft and Java

Hewlett Packard and Intel
Intel and Compaq
Compaq and Hewlett Packard
Microsoft and Hewlett Packard

A company should develop a technology INTERNALLY rather than externally when

a.

the technology is of little significance to competitive advantage.

b.
c.
d.
e.
77.

Which term is used to describe a valuable by-product of routine in-house R&D activity allowing
the firm to assimilate and exploit new knowledge?
a.
b.
c.
d.
e.

78.

80.

a.
Northern Telecom
b.
Apple
c.
Microsoft
d.
Alliance
e.
Sprint
The Fifteen-cell Product/Market Evolution Matrix

BCG Matrix.
GE Business Screen.
Product/market evolution matrix.
Developing product evolution matrix.
Innovative product evolution matrix.

For research and development strategies, what is the first stage of new product development?
(p.291)
a.
b.
c.
d.
e.

83.

varies with the number of products considered.

represents the amount of assets deployed by the company to the product or SBU.
represents market shares of the firm's SBUs or products.
represents the size of the industries involved in terms of sales.
is based on the product life cycle.

A matrix that depicts the status of developing products according to their competitive positions
and their stages of product/market evolution is referred to as
a.
b.
c.
d.
e.

82.

technological competence.
absorptive capacity.
technological continuity.
technology transfer.
index of R&D effectiveness.

The theory of a cultural right angle turn was utilized at what telecommunications equipment
company?

a.
b.
c.
d.
e.
81.

anticipated benefit
flexible manufacturing system
planned potential
absorptive capacity
competitive advantage

An organization's ability to use a new technology effectively is called

a.
b.
c.
d.
e.

79.

the supplier has proprietary technology.

the technology development process requires special expertise.
the technology development process requires new people and new resources.
the company's competitive strategy is based upon product design.

idea generation
concept evaluation
preliminary design
prototype build and test
final design and pilot production

For research and development strategies, what is the last stage of new product development?
(p.291)

10

a.
b.
c.
d.
e.
84.

For research and development strategies, what stage of new product development is occurring
when a venture team is formed to prepare desired product specifications?
a.
b.
c.
d.
e.

85.

c.
d.
e.

orchestrator
conductor
sponsor
product champion
innovative champion

Which organizational design is appropriate when the strategic importance and operational
relatedness of the new business are negligible?
a.
b.
c.
d.
e.

89.

orchestrator.
conductor.
sponsor.
product champion.
angel.

What is the term for a person who generates a new idea and supports it through many
organizational obstacles?
a.
b.
c.
d.
e.

88.

centralized R&D responsibility with decentralized operating management.

employees are dedicated to a particular project and are responsible for all
functional activities and for all phases of the innovation process.
project champions and matrix structures.
employees dedicated to innovation in general and total freedom to pursue any new idea
they wish.
total management control of all new project budgets coupled with the dart board
approach to new product selection.

A department manager who recognizes the value of an idea, helps obtain funding to develop the
innovation, and facilitates its implementation is called a(n)
a.
b.
c.
d.
e.

87.

idea generation
preliminary design
prototype build and test
final design and pilot production
new business development

According to the text, companies with entrepreneurial cultures have two characteristics in
common:
a.
b.

86.

idea generation
preliminary design
prototype build and test
final design and pilot production
new business development

complete spin-off
new product business department
special business units
new venture division
nurturing and contracting

What is the appropriate term for a new business with uncertain strategic importance and high
operational relatedness?

11

a.
b.
c.
d.
e.
90.

What term describes the birth of new businesses within an existing organization?
a.
b.
c.
d.
e.

91.

management support and individual initiative

industry skills and consumer demand
strategic importance and operation relatedness
financial sponsorship and available technology
venture spirit and management direction

Which organizational design for corporate entrepreneurship occurs when the new business has
uncertain strategic importance and is only partly related to present corporate operations?
a.
b.
c.
d.
e.

95.

replaced its entire R&D Department.

introduced cross-functional teams.
began utilizing the index of R&D effectiveness.
hired scientists from its competition.
started using strategic alliances.

According to Burgelman, what are the two interacting factors which result in the nine
organizational designs for corporate entrepreneurship?
a.
b.
c.
d.
e.

94.

entrepreneurship.
mentoring.
corporate entrepreneurship.
joint ventures.
strategic alliances.

To improve its R&D effectiveness, Chrysler Corporation

a.
b.
c.
d.
e.

93.

spin-off project
corporate entrepreneurship
enterprise creation
venture origination
industry growth

Intrapreneurship is another name for

a.
b.
c.
d.
e.

92.

complete spin-off
new product business department
micro ventures department
special business units
nurturing and contracting

direct integration
special business units
new product business department
micro new-venture department
new venture division

Which organizational design for corporate entrepreneurship occurs when the new business has a
great deal of strategic importance and operational relatedness and must be a part of the
corporation's mainstream?
a.
b.
c.
d.
e.

direct integration
special business units
new product business department
micro new-venture department
new venture division

12

96.

Which organizational design for corporate entrepreneurship occurs if the new business has
uncertain strategic importance and high operational relatedness and is a peripheral project which
is likely to emerge in the operating divisions on a continuous basis?
a.
b.
c.
d.
e.

97.

Which organizational design for corporate entrepreneurship occurs when an entrepreneurial

proposal might not be important strategically to the corporation but is strongly related to present
operations that top management might help the entrepreneurial unit to spin-off from the
corporation?
a.
b.
c.
d.
e.

98.

nurturing and contracting

micro new-venture department
new venture division
new product business department
complete spin-off

The Index of R&D Effectiveness is calculated by

a.
b.
c.
d.
e.

100.

nurturing and contracting

micro new-venture department
new venture division
new product business department
complete spin-off

Which organizational design for corporate entrepreneurship occurs if both the strategic
importance and the operational relatedness of the new business are negligible?
a.
b.
c.
d.
e.

99.

nurturing and contracting

micro new-venture department
new venture division
new product business department
complete spin-off

totaling the number of new patents obtained by a company.

dividing the percentage of total revenue spent on R&D into new product
profitability.
measuring the revenue coming from new products as a percentage of total revenue.
averaging the amount of time it takes for all new products to move from the lab to the
marketplace.
comparing the company against the 13 best R&D practices.

Which of the following is NOT one of the 13 best practices reported in the text that successful
MNCs followed?
a.
b.
c.
d.
e.

Corporate and business unit strategies are well defined and clearly communicated.
Core technologies are defined and communicated to R&D.
Transfer of technology to business units is the least important measure of R&D
effectiveness.
Formal mechanisms are used for monitoring external technological developments.
Formal, cross-functional teams are created for basic, applied, and developmental
projects.

13