Strategic Management of Technological Innovation 6th
Edition SCHILLING Test Bank
Strategic Management of Technological Innovation, 6e (Schilling)
Chapter 1 Introduction
1) Investing in process innovation helps firms lower their costs.
2) Flexible manufacturing technologies have made longer production runs economical and have
increased the importance of production economies of scale.
3) Globalization of markets has reduced the importance of innovation.
4) Innovation and new technologies have led to longer product life cycles and slower product
obsolescence.
5) Technological innovation decreases the amount of output achievable from a given quantity of
labor and capital.
6) Gross domestic product seldom relates to the amount of goods consumers can purchase.
7) Irrespective of the type of technological innovations, externalities that result from them are
always positive.
8) Technological innovation results in complete eradication of negative externalities.
9) If a pharmaceutical company discharges untreated chemical waste into local water bodies of a
community, it will impose a negative externality on the community members.
10) A firm’s organizational structure and control systems seldom have an influence on the
generation of innovative ideas.
11) Most innovative ideas do not become successful new products.
12) The majority of effort and money invested in technological innovation comes from
nonindustrial firms.
13) The innovation process is often conceived of as a funnel because most potential new product
ideas make it through the development process.
14) According to the concept of innovation funnel, the number of successful products launched
will be greater than the number of raw ideas generated.
15) According to the concept of the innovation funnel, one new idea is usually responsible for
several new products.
16) Which of the following is an advantage of flexible manufacturing technologies?
A) They have made shorter production runs economical.
B) They have increased the importance of production economies of scale.
C) They have eliminated the need for differentiation from competitors.
D) They have reduced the importance of technological innovation in industries.
17) As a result of the rapid pace of innovation:
A) product life cycles have become shorter.
B) product development cycles have become significantly longer.
C) market segmentation has reduced.
D) product obsolescence has slowed down.
18) Mark is the CFO of a company that manufactures air conditioners and refrigerators. The
management wants to diversify its list of product offerings and therefore has asked the board of
members and senior management to suggest a project plan. One of their suggestions was to
manufacture smart televisions. Mark believes that if the company invests in this new project
plan, it will not be able to make sustainable profits for long. Which of the following statements
supports Mark’s argument?
A) Market segmentation is minimal for the consumer electronics market.
B) The rate of product obsolescence is the lowest for televisions when compared with other
consumer electronics and large home appliances.
C) The time between the television’s introduction in the market and its replacement with a nextgeneration television is 12 to 24 months.
D) The product life cycle for televisions in the market is extremely long, about 10 to 12 years.
19) Virtual Inc., a manufacturing company, has recently entered the cell phone industry. This
industry is characterized by rapid technological innovations. Which of the following is most
likely to be true of Virtual Inc.?
A) The life cycle of its cell phones will be long.
B) It will face rapid product obsolescence.
C) It will face low market segmentation in the cell phone industry.
D) It will have a lower need for product differentiation.
20) The of an economy is its total annual output as measured by its final purchase
price.
A) balance of payment
B) gross domestic product
C) cash reserve ratio
D) net national income
21) Which of the following is true of technological innovations?
A) Technological innovations help increase a country’s gross domestic product.
B) Technological innovations decrease the amount of output achievable from a given quantity of
labor and capital.
C) Technological innovations slow down product obsolescence and lengthen product
development cycles.
D) Technological innovations increase production costs and reduce product differentiation.
22) If a country’s GDP stands at $4,867 billion, the country’s will be worth $4,867
billion.
A) total annual output
B) investment on technological innovation
C) savings with the World Bank
D) negative variance in budget
23) The Solow Residual refers to the:
A) obsolete products left in a market because of accelerated product life cycles.
B) less developed nations of the world being left behind because of their obsolete technology.
C) increased amount of output achievable from a given quantity of labor and capital because of
technological innovation.
D) process of dumping goods in developing and underdeveloped countries at a price lower than
the home-market price.
24) refer to the costs (or benefits) of technological innovations that are borne by
individuals other than those responsible for creating them.
A) Externalities
B) Innovation funnels
C) Opportunity costs
D) Cultural lags
25) Alex Richards is the owner of a pesticide manufacturing company. He is aware of the risks
that the residents of a nearby community will face because of the liquid pollutants released from
the manufacturing unit. In order to counter the risks, he decides to invest in a plan that will create
positive externality. Which of the following plans should Alex invest in to accomplish his
mission?
A) Setting up a shopping complex near the community
B) Setting up a water treatment plant in the vicinity
C) Setting up a couple more pesticide manufacturing companies in the vicinity
D) Setting up a basketball court for the children who reside in the community
26) Kroters Inc., a detergent manufacturing company, has built a new manufacturing plant on the
outskirts of Woodsville. Since a majority of the population of Woodsville depend on agriculture
for their livelihood, the management of Kroters decides to invest in a project that will most likely
create a positive externality for the community members. Which of the following project plans is
likely to help achieve positive externality?
A) By increasing the detergents’ life cycle based on consumer demand
B) By setting up an organic farm near Woodsville
C) By following the Solow Residual
D) By reducing the rate of product obsolescence for Woodsville residents
27) Silk Work Inc., a manufacturer of silk garments, is planning to replace hand weaving with
some modern machines that run on fuel. Which of the following consequences of this measure
can be categorized as a negative externality?
A) Increased amount of output achievable from the given quantity of labor
B) Increase in the quality of the silk garments
C) Increased pollution as a result of the new technology
D) Increased need for investment to finance the modernization
28) If a business builds a park in a community, it will create a(n) _ for the community
members.
A) social cost
B) positive externality
C) opportunity cost
D) negative variance
29) Which of the following statements is true of externalities?
A) All externalities are negative in nature and seldom affect the communities surrounding the
area where the business is based.
B) Externalities are solely borne by individuals responsible for creating them.
C) Negative externalities are completely eradicated by technological innovations.
D) Externalities can be in the form of benefits reaped by individuals other than those who created
them.
30) Electronic waste results from the disposal of technological goods. This is an example of:
A) the Solow Residual.
B) a negative externality.
C) a negative variance.
D) the innovation funnel.
31) The innovation process is often conceived of as a funnel because:
A) most innovative ideas become successful new products.
B) it decreases the amount of output achievable from a given quantity of labor and capital.
C) it increases the importance of production economies of scale.
D) there are many potential new product ideas and only a few make it through the development
process.
32) Jordan, the CEO of Early Bird Corp., believes that it is important to focus on the quantity of
new product ideas generated rather than the quality of ideas generated. He encourages everyone
in the company to come up with product ideas, and those that seem feasible are further
developed. According to him, it takes several raw ideas to develop one successful new product.
Jordan’s views reflect the concept of:
A) innovation adolescence.
B) innovation diffusion.
C) the innovation butterfly.
D) the innovation funnel.