6 - Technology based industries & management of innovation

Question 1

Invention is

Answer 1

the creation of new products and processes through the development of new knowledge or from new combinations of existing knowledge

Question 2

Innovation is

Answer 2

the initial commercialization of an invention

; producing and marketing a new good or service or by using a new method of production

Question 3

The profitability of an innovation to the innovator depends on

Answer 3

1. the value created by the innovation and

2. the share of that value that the innovator is able to appropriate

Question 4

The term regime of appropriability is

Answer 4

the conditions that influence distribution of returns to innovation.

strong regime of appropriability→substantial share of value

Question 5

Four factors are critical in determining the extent to which innovators are able to appropriate the value of their innovation

Answer 5

1. property rights,
2. the tacitness and complexity of the technology,
3. lead‐time and
4. complementary resources

Question 6

Several areas of intellectual property

Answer 6

1. PATENTS - the lightbulb, bluetooth
2. COPYRIGHTS - books, movies, music
3. TRADEMARKS - the symbol of the golden arches of McDonalds, Coco Chanel’s name
4. TRADE SECRETS - Coca Cola’s secret recipe, KFC’s secret recipe

Question 7

In the absence of effective legal protection, the extent to which an innovation can be imitated by a competitor depends on

Answer 7

the ease with which the technology can be comprehended and replicated. This depends, first, on the extent to which the technical knowledge is codifiable.

Question 8

Codifiable knowledge is

Answer 8

that which can be written down

Question 9

Tacitness (understood without being openly expressed) and complexity do not provide lasting barriers to imitation, but they do offer the innovator

Answer 9

time.
Innovation creates a temporary competitive advantage that offers a window of opportunity for the innovator to build on the initial advantage.

Question 10

The innovator’s lead time is

Answer 10

the time it will take followers to catch up.

Question 11

Bringing new products & processes to market requires not just invention but also

Answer 11

COMPLEMENTARY RESOURCES: diverse resources & capabilities needed to finance, produce it

Question 12

what are the alternative strategies to exploiting innovation

Answer 12

1. licensing
2. outsourcing certain functions
3. strategic alliance
4. joint venture
5. internal commercialization

Question 13

choice of strategy mode depends on 2 main sets of factors:

Answer 13

1. characteristics of the innovation ( the extent to which a firm can establish clear property rights in an innovation) &
2. resources and capabilities of the firm (different strategies require different resources and capabilities)

Question 14

emerging industries are risky. there are 2 main sources of uncertainty

Answer 14

• TECHNOLOGICAL uncertainty: arise from unpredictability of technological evolution
• MARKET uncertainty: relates to size and growth rates of markets for new products

Question 15

useful strategies for limiting risk include

Answer 15

• COOPERATING WITH LEAD USERS: careful monitoring of and response to market trends and customer requirements is essential to avoid major errors in technology and design
• LIMITING RISK EXPOSURE: financial and operational practices that minimize a firm’s exposure to adversity
• FLEXIBILITY

Question 16

a standard is

Answer 16

a format, an interface or a system that allows interoperability (the ability of computer systems or software to exchange and make use of information)

Question 17

standards can be

Answer 17

PUBLIC - those that are available to all either free or for a nominal charge
and
PRIVATE - those where the technologies and designs are owned by companies or individuals

Question 18

Standards emerge in markets that

Answer 18

are subject to network externalities.
A network externality exists whenever the value of a product to an individual customer depends on the number of other users of that product.
The classic example of network externality is the telephone.
Since there is little satisfaction to be gained from talking to oneself on the telephone, the value of a telephone to each user depends on the number of other users connected to the same telephone system.

Question 19

The implication of network externalities is that

Answer 19

they create positive feedback. Once a technology or system gains market leadership, it attracts a growing proportion of new buyers. This process is called tipping: once a certain threshold is reached, cumulative forces become unstoppable

Question 20

Creativity requires management systems that

Answer 20

are quite different from those appropriate for efficiency.

They desire to work in an EGALITARIAN culture characterized by:

• provide the opportunity to be spontaneous,
• experience freedom and have fun in the performance of a task
• praise, recognition
• opportunities for education & professional growth

Question 21

Organizational initiatives aimed at stimulating new product development and the exploitation of new technologies include:

Answer 21

1.CROSS‐FUNCTIONAL PRODUCT DEVELOPMENT TEAMS have proven to be highly effective mechanisms for integrating creativity with functional effectiveness.
2.PRODUCT CHAMPIONS provide a means, first, for incorporating individual creativity
within organizational processes and, second, for linking invention to subsequent commercialization.
3.BUYING INNOVATION: Recognition that small, technology‐intensive start‐ups have advantages in the early stages of the innovation process, while large corporations have superior capabilities, has encouraged large companies to enhance their technological performance by acquiring innovation from other firms.
4.OPEN INNOVATION: The shift from vertically integrated systems of innovation where companies develop their own technologies in‐house, then exploit them internally, to more market‐based systems where companies buy in technology while also licensing out their own technologies, has given way to ideas of open innovation.
5.CORPORATE INCUBATORS are business developments established to fund and nurture new businesses, based upon technologies that have been developed internally but have limited applications within a company’s established businesses.