Strategic Management of Technological Innovation Melissa Schilling 6e - Test Bank

Strategic Management of Technological Innovation Melissa Schilling 6e – Test Bank

 

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Sample Questions Are Posted Below

 

Strategic Management of Technological Innovation, 6e (Schilling)

Chapter 5   Timing of Entry

 

1) Early leaders are firms that are the first to enter a market.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Overview

Accessibility:  Keyboard Navigation

 

2) Early followers enter the market only after a product begins to penetrate the mass market.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Overview

Accessibility:  Keyboard Navigation

 

3) The initial cost of a good itself can be a switching cost.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  First-Mover Advantages

Accessibility:  Keyboard Navigation

 

4) Firms that enter the market early can preemptively capture scarce resources such as key locations, government permits, patents, access to distribution channels, and relationships with suppliers.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  First-Mover Advantages

Accessibility:  Keyboard Navigation

 

5) Late entrants typically bear the bulk of the research and development expenses for their product or service technologies.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

6) First movers typically invest more in exploratory research than late entrants.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

7) All pioneers face customer uncertainty.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

8) Other things being equal, less customer uncertainty favors earlier timing of entry.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

9) When a market is characterized by mature enabling technologies, a firm should enter the market late.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

10) All innovations require complementary goods, and none of them can utilize existing complementary goods.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

11) In industries that have increasing returns to adoption due to network externalities, allowing competitors to get a head start in building an installed base is the safest strategy.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

12) Many start-up firms fail because new innovations tend to be adopted very slowly at first.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

 

 

13) Other things being equal, an entrant with a strong reputation can attract adoptions earlier than entrants without strong reputations.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

14) A firm intending to refine an earlier entrant’s technology should avoid fast-cycle development processes.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Strategies to Improve Timing Options

Accessibility:  Keyboard Navigation

 

15) A disadvantage of using parallel development processes is that it greatly lengthens the new product development time.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Strategies to Improve Timing Options

Accessibility:  Keyboard Navigation

 

16) The first entrants to sell in a new product or service category are referred to as ________.

1. A) pioneers
2. B) early leaders
3. C) early followers
4. D) laggards

 

Answer:  A

Difficulty: 1 Easy

Topic:  Overview

Accessibility:  Keyboard Navigation

 

17) Doven Inc. pioneered software development in the 1970s and introduced its range of office tools well ahead of its competitors. According to the classification scheme of entrants, Doven would be classified as a(n) ________.

1. A) first mover
2. B) early follower
3. C) early leader
4. D) laggard

 

Answer:  A

Difficulty: 2 Medium

Topic:  Overview

Accessibility:  Keyboard Navigation

 

18) Magnitude Inc. was the first company to introduce a video gaming console in the market. However, consumers were uncertain about the product, and its high costs discouraged consumers from purchasing it. Eventually, Magnitude withdrew the product from the market. A few years later, Mantel Corp. and Adventura Inc. came up with their respective gaming consoles and successfully established their products. In this scenario, Mantel and Adventura would be considered:

1. A) pioneers.
2. B) early followers.
3. C) laggards.
4. D) late movers.

 

Answer:  B

Difficulty: 3 Hard

Topic:  Overview

Accessibility:  Keyboard Navigation

 

19) Marine Systems was the first company to develop an inventory management software specifically for hotels and restaurants. Soon after Marine Systems launched its product, Unicorn Systems developed a similar software. The software developed by Unicorn Systems outperformed the one developed by Marine Systems, and it eventually became the market leader. In this scenario, Unicorn Systems is an example of a(n) ________.

1. A) first pioneer
2. B) late mover
3. C) early follower
4. D) eccentric laggard

 

Answer:  C

Difficulty: 3 Hard

Topic:  Overview

Accessibility:  Keyboard Navigation

 

20) If aspects that customers have come to expect in a technology are difficult for competitors to imitate, being the technology leader will:

1. A) result in an inability to preemptively capture scarce assets.
2. B) yield sustained monopoly rents.
3. C) result in lower bargaining power over suppliers.
4. D) mean negligible research and development costs.

 

Answer:  B

Difficulty: 2 Medium

Topic:  First-Mover Advantages

Accessibility:  Keyboard Navigation

 

 

 

21) Alpen Inc. is a manufacturing firm that holds the patent for a new food processor that is considerably safer and more efficient than the others available in the market. Being the only firm that manufactures this product, Alpen charges a very high price for it. Based on the information provided in the scenario, which of the following statements is most likely to be true?

1. A) As Alpen is the technology leader in the food processor manufacturing sector, the firm will yield sustained monopoly rents.
2. B) Since Alpen has developed and invested in the new invention, which is the food processor, the firm will have no other option but to invest in new complementary goods if it wants to sell its products.
3. C) Alpen will lose business and ultimately fail because of incumbent inertia.
4. D) Since there are several food processor manufacturing firms in the market, Alpen will lose to its existing competitors and will seldom be able to make any profits.

 

Answer:  A

Difficulty: 3 Hard

Topic:  First-Mover Advantages

Accessibility:  Keyboard Navigation

 

22) Jupiter Inc., a software firm, is starting to face competition from the new entrant in its market, Coral Inc. Jupiter wants to prevent its existing customers from switching to Coral’s newly developed software. Which of the following measures should Jupiter adopt to achieve its objective?

1. A) Ensuring that customers find its software simpler and more convenient to use than that of Coral’s
2. B) Keeping the initial cost of its software higher than that of Coral’s
3. C) Keeping the prices of the complements required for its software higher than those set by Coral
4. D) Ensuring that fewer complementary products are available for its products than those for the products of Coral

 

Answer:  A

Difficulty: 3 Hard

Topic:  First-Mover Advantages

Accessibility:  Keyboard Navigation

 

 

 

23) Which of the following statements is true of first movers in comparison with early followers and late entrants?

1. A) Cost of developing necessary production processes and complementary goods is lower for first movers.
2. B) First movers are in a better position to exploit buyer switching costs and also to reap increasing returns advantages.
3. C) First movers, being incumbents, have greater ability than later entrants to respond to changes in the industry environment and adopt newer production processes.
4. D) First movers fail to capture scarce resources such as key locations, government permits, access to distribution channels, and relationships with suppliers.

 

Answer:  B

Difficulty: 2 Medium

Topic:  First-Mover Advantages

Accessibility:  Keyboard Navigation

 

24) The tendency of existing firms to be slow to respond to changes in the industry environment due to their large size, established routines, or prior strategic commitments to existing suppliers and customers is known as:

1. A) monopolization.
2. B) path dependency.
3. C) incumbent inertia.
4. D) technology trajectory.

 

Answer:  C

Difficulty: 1 Easy

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

25) Fashion Fair Corp., the first mover in the “all-year discount” stores market, lost its market share to a late entrant, Brand Fair Inc. Brand Fair operates online discount stores, which is cost-efficient when compared to investing in a brick-and-mortar store. Fashion Fair has been unable to replicate the online store business model because of its existing contracts with suppliers and heavy investment in retail stores. This ultimately leads to the failure of the business. Which of the following can be attributed to Fashion Fair’s failure?

1. A) Incumbent inertia
2. B) Use of tacit resources
3. C) Free-rider effect
4. D) Presence of low exit barriers

 

Answer:  A

Difficulty: 3 Hard

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

 

 

26) When Fun Bun Inc., an international fast-food chain, set up operations in China, it had to teach farmers how to grow a particular variety of potatoes, and bakers had to be taught how to make hamburger buns. This is an example of:

1. A) corporate social responsibility.
2. B) an undeveloped supply channel.
3. C) incumbent inertia.
4. D) monopoly rents.

 

Answer:  B

Difficulty: 3 Hard

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

27) Which of the following is an advantage of being a late entrant into a market?

1. A) Late entrants are the first to capture scarce resources.
2. B) Late entrants often do not have to invest in exploratory research.
3. C) Late entrants often are most likely to capitalize on monopoly rents.
4. D) Late entrants are unaffected by switching costs.

 

Answer:  B

Difficulty: 2 Medium

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

28) Component technologies that are necessary for the performance or desirability of a given innovation are referred to as ________.

1. A) architectural technologies
2. B) diffused technologies
3. C) primary technologies
4. D) enabling technologies

 

Answer:  D

Difficulty: 1 Easy

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

 

 

29) Pioneer Athletics Inc. wants to provide better landing mats for gymnasts. It therefore asks its foam suppliers to use a new innovative process to manufacture higher quality, durable foam in its mats. This new process used to develop the foam represents a(n) ________ for Pioneer Athletics.

1. A) network externality
2. B) preemption rent
3. C) enabling technology
4. D) incumbent rent

 

Answer:  C

Difficulty: 3 Hard

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

30) Which of the following statements is true of a firm entering a market too early?

1. A) Distribution channels required for the firm’s products will be well established prior to its entry.
2. B) Enabling technologies and complements available to the firm will be immature.
3. C) The firm’s competitors would have already captured controlling shares of the market.
4. D) The firm will not be able to reap the advantages of monopoly rent.

 

Answer:  B

Difficulty: 2 Medium

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

31) Which of the following statements is true of customer preferences?

1. A) The importance of technological features to customers stays constant over time.
2. B) Customers can differ from producers in their understanding of a new technology.
3. C) All pioneers of new-to-the-world technologies face customer uncertainty.
4. D) Other things being equal, more customer uncertainty favors earlier timing of entry.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

 

 

32) Zach has invented a device, which when plugged to household appliances, such as televisions, vacuum cleaners, sound systems, and mixer grinders, will operate them using solar power. The device also works as a battery and converts solar power into energy that can be used during the night. This device needs to be plugged into a port in the household appliances. Since not all appliances have this feature, Zach is of the opinion that he should delay his entry into the market. Which of the following statements supports Zach’s decision?

1. A) The product works without the need for complementary goods. Hence, the more he delays his entry into the market, the better the competition is for his product.
2. B) The entry barriers are low for this product in the market and hence it makes sense for Zach to delay his entry.
3. C) Less mature enabling technologies may favor waiting for enabling technologies to be further developed.
4. D) Since all pioneers face customer uncertainty, it is wise for Zach to delay his entry into the market as much as possible.

 

Answer:  C

Difficulty: 3 Hard

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

33) In which of the following circumstances can a firm confidently enter the market at any time?

1. A) When the enabling technologies are less mature
2. B) When the product requires new complementary goods
3. C) When there is high customer uncertainty
4. D) When the product to be manufactured and sold is inimitable

 

Answer:  D

Difficulty: 2 Medium

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

34) Which of the following is a reason attributed to the failure of start-up firms?

1. A) New innovations typically tend to be adopted very slowly at first.
2. B) Decisions such as producing inimitable goods pressurize start-up firms to enter the market early in order to avoid competition.
3. C) All innovations by start-up firms require new complementary goods.
4. D) All start-up firms will have to wait a considerable amount of time for the enabling technologies to develop.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

 

 

35) ________ require multiple stages of a new product development process to occur simultaneously.

1. A) Incumbent development processes
2. B) Parallel development processes
3. C) Monopoly development processes
4. D) Slow-cycle development processes

 

Answer:  B

Difficulty: 1 Easy

Topic:  Strategies to Improve Timing Options

Accessibility:  Keyboard Navigation

 

36) Why were other keyboards that claimed to be more efficient not able to replace the QWERTY keyboard? Explain how this illustrates the need to consider switching costs when introducing new technologies.

 

Answer:  The QWERTY keyboard was initially introduced to slow down typing and prevent key jamming on mechanical keyboards. Since so many people had already learned to use this keyboard, they were unwilling to learn how to type on other keyboards even though key jamming was no longer an issue. This illustrates that if buyers face high switching costs, the firm that captures customers early may be able to keep those customers even if technologies with a superior value proposition are introduced later.

Difficulty: 2 Medium

Topic:  First-Mover Advantages

Accessibility:  Keyboard Navigation

 

37) Loren has invented a product that detects water leakages caused by broken pipes and sends out an alarm similar to a smoke alarm. However, Loren doesn’t have sufficient finances to invest in this new product. Therefore, he borrows money from his friends to enter the market and begins to experience some success. The product is not patentable because it is too similar to other existing technologies. Major corporations have seen his success and have now entered the market with competing products. What will be the probable destiny of Loren’s company?

 

Answer:  Since Loren does not have significant resources and the returns will probably be slow, he may not last very long in this new industry. His lack of funds means that he will have very little to invest in product enhancements, while his competitors would be able to improve the product. For example, one company might attach a dialing system to the alarm that notifies a neighbor, a plumber, or the police department in case the owner is not at home. The larger companies can outspend Loren in advertising as well.

Difficulty: 3 Hard

Topic:  First-Mover Disadvantages

Accessibility:  Keyboard Navigation

 

 

 

38) SmartShoe Inc. is the market leader in the gliding shoe market and enjoys an excellent reputation. It is the pioneer of this new market and currently holds 40 percent market share. Now, SmartShoe wants to introduce a new range of orthopedic shoes. Discuss how its reputation might affect the new product’s acceptance among distributors and consumers.

 

Answer:  SmartShoe’s excellent reputation will give the new product high credibility and will increase the likelihood of its acceptance into the market. The fact that it has such a strong track record will increase the likelihood that it will be able to line up distributors to carry its new range of orthopedic shoes. Consumers are also more likely to trust this entry because of satisfaction with past products of the company. All of this will mean earlier adoption of the product than any other company could expect.

Difficulty: 3 Hard

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

39) How do enabling technologies influence a firm’s entry into the market?

 

Answer:  Many innovations rely on crucial enabling technologies to ensure their performance. A high-definition television set is of little value if networks are incapable of broadcasting in high definition; cellular phones or portable stereos would have little value if small and long-lasting batteries were unavailable. A developer must identify which enabling technologies will affect the performance of the new innovation and assess the degree to which those technologies are mature enough (or will be mature enough) to deliver the desired performance. More mature enabling technologies allow earlier entry; less mature enabling technologies may favor waiting for enabling technologies to be further developed.

Difficulty: 2 Medium

Topic:  Factors Influencing Optimal Timing of Entry

Accessibility:  Keyboard Navigation

 

40) What assumptions underlie the use of timing of entry strategies into the market for new products?

 

Answer:  It is assumed that timing of entry is a matter of choice for the firm. However, implicit in this assumption is a corollary assumption that the firm is capable of producing the technology at any point in the time horizon under consideration. For this to be true, the firm must possess the core capabilities required to produce the technology to consumer expectations, or be able to develop them quickly. Also, to be able to take advantage of timing strategies for entry, the firm must have a fast-cycle development process in place and the financial resources to develop, produce, and market the product.

Difficulty: 2 Medium

Topic:  Strategies to Improve Timing Options

Accessibility:  Keyboard Navigation