Strategic Management of Technological Innovation 5th Edition By Melissa A Schilling – Test Bank

Complete Test Bank With Answers

 

 

Sample Questions Posted Below

 

Chapter 05

Timing of Entry

True / False Questions

1. 2. 3. 4. 5. 6. 7. 8. 9. Early leaders are firms that are the first to enter a market.

True False

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

market.

True False

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

True False

In an industry characterized by increasing returns to adoption, there can be powerful

advantages to being an early provider.

True False

Late entrants typically bear the bulk of the research and development expenses for their

product or service technologies.

True False

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

True False

All pioneers face customer uncertainty.

True False

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

True False

When a market is characterized by mature enabling technologies, a firm should enter

the market late.

True False

10. Not all innovations require complementary goods.

True False11. 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.

True False

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

first.

True False

13. Other things being equal, an entrant with a strong reputation can attract adoptions

earlier than entrants without strong reputations.

True False

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

development processes.

True False

15. A disadvantage of using parallel development processes is that it greatly lengthens the

new product development time.

True False

Multiple Choice Questions

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

A. pioneer

s

B. early

leaders

C. early

followers

D. laggard

s17. 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) _____.

A. first

mover

B. early

follower

C. early

leader

D. laggar

d

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:

A. pioneer

s.

B. early

followers.

C. laggard

s.

D. late

movers.

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) _____.

A. first

pioneer

B. late

mover

C. early

follower

D. eccentric

laggard20. If the aspects that customers have come to expect in a technology are difficult for

competitors to imitate, being the technology leader will:

A. result in an inability to preemptively capture

scarce assets.

B. enable it to yield sustained monopoly

rents.

C. result in lower bargaining power over

suppliers.

D. mean negligible research and development

costs.

21. Alpen Inc. is a manufacturing firm that holds the patent for a new food processing

machine 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. This is referred to as _____.

A. monopoly

rent

B. technology

lag

C. incumbent

inertia

D. absorptive

capacity

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?

A. Ensuring that customers find its software simpler and more convenient to use than

that of Coral

B. Keeping the initial cost of its software higher than that

of Coral’s

C. Keeping the prices of the complements required for its software higher than that

set by Coral

D. Ensuring that fewer complementary products are available for its products in

comparison to that for the products of Coral23. Which of the following statements is true of first movers in comparison with early

followers and late entrants?

A. Cost of developing necessary production processes and complementary goods is lower

for first movers.

B. First movers are in a better position to exploit buyer switching costs and also to reap

increasing returns advantages.

C. First movers, being incumbents, have greater ability than later entrants to respond to

changes in the industry environment and adopt newer production processes.

D. First movers fail to capture scarce resources such as key locations, government

permits, access to distribution channels, and relationships with suppliers.

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:

A. monopoly

costs.

B. path

dependency.

C. incumbent

inertia.

D. technology

trajectory.

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 its discount stores

solely through the Internet, which saves a lot of expenses. Fashion Fair has been unable

to replicate this strategy by adopting the online store business model due to its existing

contracts with suppliers and heavy investment in retail stores. Fashion Fair has been

experiencing:

A. incumbent

inertia.

B. monopoly

rents.

C. path

dependency.

D. technology

attrition.26. When Fun Bun Inc., an international fast-food chain, first moved into 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:

A. corporate social

responsibility.

B. an undeveloped supply

channel.

C. incumbent

inertia.

D. monopoly

rents.

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

A. Late entrants are the first to capture scarce

resources.

B. Late entrants often do not have to invest in exploratory

research.

C. Late entrants often are most likely to capitalize on

monopoly rents.

D. Late entrants are unaffected by switching

costs.

28. Component technologies that are necessary for the performance or desirability of a

given innovation are referred to as _____.

A. architectural

technologies

B. diffused

technologies

C. primary

technologies

D. enabling

technologies

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 for use in its mats. This new process used to develop the foam represents

a(n) _____ for Pioneer Athletics.

A. network

externality

B. preemption

rent

C. enabling

technology

D. incumbent

rent30. Which of the following statements is true of a firm entering a market too early?

A. Distribution channels required for the firm’s products will be well established

prior to its entry.

B. Enabling technologies and complements available to the firm will be

immature.

C. The firm’s competitors would have already captured controlling shares of

the market.

D. The firm will not be able to reap the advantages of

monopoly rent.

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

A. The importance of technological features to customers stays constant

over time.

B. Customers can differ from producers in their understanding of a new

technology.

C. All pioneers of new-to-the-world technologies face customer

uncertainty.

D. Other things being equal, more customer uncertainty favors earlier

timing of entry.

32. A delayed entry into a market with a new technology is preferred if:

A. support by complementary goods providers

is high.

B. enabling technologies are less

mature.

C. customer uncertainty is

low.

D. the scope for improving over previous technologies

is high.

33. Which of the following calls for an early entry into a market?

A. Immature enabling

technologies

B. Unavailability of complementary

goods

C. High customer

uncertainty

D. Low entry

barriers34. New innovations typically tend to:

A. be adopted very slowly at

first.

B. eliminate incumbent inertia for late

entrants.

C. eliminate monopoly rents when they are first

introduced.

D. reduce the effectiveness of future enabling

technologies.

35. _____ require multiple stages of a new product development process to occur

simultaneously.

A. Incumbent development

processes

B. Parallel development

processes

C. Monopoly development

processes

D. Slow-cycle development

processes

Essay Questions

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.37. Explain why sometimes the follower and not the first mover of a new technology is more

successful in the marketplace.

38. 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 has very little personal

money to invest in this new product. Therefore, he borrows enough 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?

39. Since SmartShoe Inc. is the market leader in the gliding shoe market, it 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.40. What assumptions underlie the use of timing of entry strategies into the market for new

products?Chapter 05 Timing of Entry Answer Key

True / False Questions

1.

(p. 93)

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

FALSE

Difficulty: 1 Easy

2.

(p. 93)

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

market.

FALSE

Difficulty: 1 Easy

3.

(p. 94)

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

TRUE

Difficulty: 1 Easy

4.

(p. 95)

In an industry characterized by increasing returns to adoption, there can be powerful

advantages to being an early provider.

TRUE

Difficulty: 1 Easy

5.

(p. 96)

Late entrants typically bear the bulk of the research and development expenses for

their product or service technologies.

FALSE

Difficulty: 1 Easy

6.

(p. 96)

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

TRUE

Difficulty: 1 Easy

7.

(p. 99)

All pioneers face customer uncertainty.

FALSE

Difficulty: 1 Easy

8.

(p. 99)

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

TRUE

Difficulty: 1 Easy9.

(p. 100)

When a market is characterized by mature enabling technologies, a firm should enter

the market late.

FALSE

Difficulty: 1 Easy

10.

(p. 100)

Not all innovations require complementary goods.

TRUE

Difficulty: 1 Easy

11.

(p. 101)

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.

FALSE

Difficulty: 1 Easy

12.

(p. 102)

Many start-up firms demise because new innovations tend to be adopted very slowly

at first.

TRUE

Difficulty: 1 Easy

13.

(p. 103)

Other things being equal, an entrant with a strong reputation can attract adoptions

earlier than entrants without strong reputations.

TRUE

Difficulty: 1 Easy

14.

(p. 103)

A firm intending to refine an earlier entrant’s technology should avoid fast-cycle

development processes.

FALSE

Difficulty: 1 Easy

15.

(p. 103)

A disadvantage of using parallel development processes is that it greatly lengthens

the new product development time.

FALSE

Difficulty: 1 Easy

Multiple Choice Questions16.

(p. 93)

17.

(p. 93)

18.

(p. 93)

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

A. pioneer

s

B. early

leaders

C. early

followers

D. laggard

s

Difficulty: 1 Easy

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) _____.

A. first

mover

B. early

follower

C. early

leader

D. laggar

d

Difficulty: 2 Medium

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:

A. pioneer

s.

B. early

followers.

C. laggard

s.

D. late

movers.

Difficulty: 3 Hard19.

(p. 93)

20.

(p. 93-

94)

21.

(p. 94)

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) _____.

A. first

pioneer

B. late

mover

C. early

follower

D. eccentric

laggard

Difficulty: 3 Hard

If the aspects that customers have come to expect in a technology are difficult for

competitors to imitate, being the technology leader will:

A. result in an inability to preemptively capture

scarce assets.

B. enable it to yield sustained monopoly

rents.

C. result in lower bargaining power over

suppliers.

D. mean negligible research and development

costs.

Difficulty: 2 Medium

Alpen Inc. is a manufacturing firm that holds the patent for a new food processing

machine 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. This is referred to as _____.

A. monopoly

rent

B. technology

lag

C. incumbent

inertia

D. absorptive

capacity

Difficulty: 3 Hard22.

(p. 94)

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?

A. Ensuring that customers find its software simpler and more convenient to use than

that of Coral

B. Keeping the initial cost of its software higher than that

of Coral’s

C. Keeping the prices of the complements required for its software higher than that

set by Coral

D. Ensuring that fewer complementary products are available for its products in

comparison to that for the products of Coral

Difficulty: 3 Hard

23.

(p. 94-

95)

Which of the following statements is true of first movers in comparison with early

followers and late entrants?

24.

(p. 96)

A. Cost of developing necessary production processes and complementary goods is

lower for first movers.

B. First movers are in a better position to exploit buyer switching costs and also to

reap increasing returns advantages.

C. First movers, being incumbents, have greater ability than later entrants to respond

to changes in the industry environment and adopt newer production processes.

D. First movers fail to capture scarce resources such as key locations, government

permits, access to distribution channels, and relationships with suppliers.

Difficulty: 2 Medium

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:

A. monopoly

costs.

B. path

dependency.

C. incumbent

inertia.

D. technology

trajectory.

Difficulty: 1 Easy25.

(p. 96)

26.

(p. 96)

27.

(p. 96)

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 its discount stores

solely through the Internet, which saves a lot of expenses. Fashion Fair has been

unable to replicate this strategy by adopting the online store business model due to

its existing contracts with suppliers and heavy investment in retail stores. Fashion Fair

has been experiencing:

A. incumbent

inertia.

B. monopoly

rents.

C. path

dependency.

D. technology

attrition.

Difficulty: 3 Hard

When Fun Bun Inc., an international fast-food chain, first moved into 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:

A. corporate social

responsibility.

B. an undeveloped supply

channel.

C. incumbent

inertia.

D. monopoly

rents.

Difficulty: 3 Hard

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

A. Late entrants are the first to capture scarce

resources.

B. Late entrants often do not have to invest in exploratory

research.

C. Late entrants often are most likely to capitalize on

monopoly rents.

D. Late entrants are unaffected by switching

costs.

Difficulty: 2 Medium28.

(p. 96)

29.

(p. 96)

30.

(p. 96)

Component technologies that are necessary for the performance or desirability of a

given innovation are referred to as _____.

A. architectural

technologies

B. diffused

technologies

C. primary

technologies

D. enabling

technologies

Difficulty: 1 Easy

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 for use in its mats. This new process used to develop the foam

represents a(n) _____ for Pioneer Athletics.

A. network

externality

B. preemption

rent

C. enabling

technology

D. incumbent

rent

Difficulty: 3 Hard

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

A. Distribution channels required for the firm’s products will be well established

prior to its entry.

B. Enabling technologies and complements available to the firm will be

immature.

C. The firm’s competitors would have already captured controlling shares of

the market.

D. The firm will not be able to reap the advantages of

monopoly rent.

Difficulty: 2 Medium31.

(p. 99)

32.

(p. 100)

33.

(p. 100)

34.

(p. 102)

Which of the following statements is true of customer preferences?

A. The importance of technological features to customers stays constant

over time.

B. Customers can differ from producers in their understanding of a new

technology.

C. All pioneers of new-to-the-world technologies face customer

uncertainty.

D. Other things being equal, more customer uncertainty favors earlier

timing of entry.

Difficulty: 2 Medium

A delayed entry into a market with a new technology is preferred if:

A. support by complementary goods providers

is high.

B. enabling technologies are less

mature.

C. customer uncertainty is

low.

D. the scope for improving over previous technologies

is high.

Difficulty: 2 Medium

Which of the following calls for an early entry into a market?

A. Immature enabling

technologies

B. Unavailability of complementary

goods

C. High customer

uncertainty

D. Low entry

barriers

Difficulty: 1 Easy

New innovations typically tend to:

A. be adopted very slowly at

first.

B. eliminate incumbent inertia for late

entrants.

C. eliminate monopoly rents when they are first

introduced.

D. reduce the effectiveness of future enabling

technologies.

Difficulty: 2 Medium35.

(p. 103)

_____ require multiple stages of a new product development process to occur

simultaneously.

A. Incumbent development

processes

B. Parallel development

processes

C. Monopoly development

processes

D. Slow-cycle development

processes

Difficulty: 1 Easy

Essay Questions

36.

(p. 93-

94)

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.

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

37.

(p. 98)

Explain why sometimes the follower and not the first mover of a new technology is

more successful in the marketplace.

Although first movers have the opportunity to shape the market and have the first

shot at becoming the dominant design, often they are not sure of consumer

preferences. As consumer preferences become known, they may have to modify their

product designs. Sometimes they must also engage in consumer education about

using the new technology, which can be an expensive proposition. Followers can

capitalize on learning about consumer preferences from the marketplace. They can

introduce products that meet consumer preferences without having to make costly

adjustments. They do not have to worry as much about consumer education. This

helps them in becoming more successful in the marketplace.

Difficulty: 2 Medium38.

(p. 102)

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 has very little personal

money to invest in this new product. Therefore, he borrows enough 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?

Since Mr. Loren does not have significant resources and the income 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 Mr. Loren in

advertising as well.

39.

(p. 102-

103)

Difficulty: 3 Hard

Since SmartShoe Inc. is the market leader in the gliding shoe market, it 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.

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 due to 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 Hard40.

(p. 103)

What assumptions underlie the use of timing of entry strategies into the market for

new products?

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