School of Business and Economics

Exam: Strategic Management of Technology and Innovation

Code: E_BK3_SMTI

Examinator: F. Deken
Co-reader: C. van der Geest & S.A. Rijsdijk

Date:

Time:

Duration: 2 hours and 45 minutes

Scrap paper allowed: Yes

Dictionary allowed: No
Calculator allowed: No
Graphical calculator
allowed: No
Number of questions: 30
Type of questions: 20 multiple choice; 10 open questions
Answer in: English

Remarks:

Credit score: Maximum number of points is 100 (60 points for the open ended questions and
40 points for the multiple choice questions). To determine the grade for the exam, the
number of credits is divided by 10 and will be corrected for potential successful guessing at
the mc questions. Minimum score for the exam is 5.0. The score for the exam counts for
50% of the final grade for the course.

Grades:

Inspection:

Number of pages:
 Good luck!

INSTRUCTIONS

Write your answers in correct English sentences.

There are no formal word limit for your answer, but we prefer concise (yet complete)
answers.

When referred to book chapters and/or Schilling, this concerns:

Schilling, M. (2019). Strategic management of technological innovation (6th ed). Boston: McGraw-Hill.

The following papers can be referred to in the questions:

Adner, R. (2006). Match your innovation strategy to your innovation ecosystem. Harvard business
review, 84(4), 98.
Ansari, S., Garud, R., & Kumaraswamy, A. (2016). The disruptor's dilemma: TiVo and the US television
ecosystem. Strategic Management Journal, 37(9), 1829-1853
Boudreau, K. (2010). Open platform strategies and innovation: granting access vs. devolving control.
Management Science, 56(10), Section 2. Literature and Background.
Christensen, C. and Raynor, M. (2003). The innovator’s solution, Chapter 2: How can we beat our most
powerful competitors? Boston: Harvard Business Review Press.
Cooper, R. (2008). The Stage-Gate Idea-to-Launch Process–Update, What’s New and NexGen
Systems. Journal of Product Innovation Management, 25(2), 13–232–232.
Gawer, A. (2014). Bridging differing perspectives on technological platforms: Toward an integrative
framework. Research Policy, 43(7), 1239–1249.
O'Reilly, C. A., & Tushman, M. L. (2013). Organizational ambidexterity: past, present, and future.
Academy of Management Perspectives, 27(4), 324–338.
MULTIPLE CHOICE QUESTIONS

1.Which of the following is a correct definition of ‘technology’? (Lecture 1)

a) Technology is the process of turning ideas into products and capturing value from them
b) Technology is a phenomenon captured and put to use
c) Technology is the act of introducing a new device, method or material for application to
commercial or practical objectives
d) Technology = theoretical conception + technical invention + commercial exploitation

2. In Lecture 1 we discussed Oxford university research on the probability of jobs being

computerized and bottleneck variables for computerization. Which of the following
statements is NOT in line with that research?
a) The job of a dishwasher is more likely to be computerized than the job of a public
relations manager, because the latter requires a higher level of social intelligence
b) The job of a court clerk is more likely to be computerized than the job of fashion
designer, because the latter requires a higher level of creativity
c) A telemarketer job is more likely to be computerized than the job of a surgeon, because
the latter requires a higher level of perception and manipulation
d) The job of recreational therapist is more likely to be computerized than the job of a
translator, because the latter requires a higher level of analytical skills

3. A “unicycle” is a vehicle that touches the ground with only one wheel. The most common
variation has a frame with a saddle, and has a pedal-driven direct drive. How does this
unicycle compare to the “safety bicycle”, which is the dominant design of bikes as we use
today (Lecture 2). Compared to the safety bicycle, I would categorize the unicycle as a:
a) Component innovation
b) Incremental innovation
c) Disruptive innovation
d) Architectural innovation

4. Christensen & Raynor (2003) describe sustaining innovations, low-end disruptions, new-
market disruptions, and hybrid disruptions. They explain that Southwest Airlines initially
targeted customers who were not flying (but rather used cars and buses) but also pulled
customers out of the low-end of major airlines’ value network. The authors therefore
describe Southwest Airlines’ services as a:
a) Low-end disruption
b) Hybrid disruption
c) New-market disruption
d) Sustaining innovation

5. In Lecture 3 (and Chapter 4) it was discussed that technologies may provide value to
users on three dimensions of value: standalone (technological) utility, complementary
products, and installed base. Considering these dimensions, which of the following
statements is FALSE?
a) Higher technological utility is the main driver whether users value one technology
over another.
b) If a new technology is compatible with the installed base and complementary products of
an incumbent technology, then it can deliver more value to users even by offering a small
improvement in its stand-alone utility compared to the incumbent technology.
c) Users may not necessarily rely on objective information in assessing the value offered by
a new technology - they are also affected by subjective assessment of their complementary
products and user bases.
d) If a new technology is incompatible with the installed base and complementary products
of an incumbent technology, then it should deliver a considerable improvement in its stand-
alone utility, such that, this improvement in the standalone utility is larger than the utility
users derive from the installed base and complementary products of the incumbent
technology.

6. Which of the following is NOT a factor driving the emergence of a dominant standard
(Lecture 3; Schilling Chapter 4)?
a) Increasing returns to production via learning curve effects
b) Government regulation pushing firms to adopt a single standard
c) Increasing returns to users by the availability of complementary goods (i.e., presence of
indirect network effects)
d) Government regulation to make two separate standards compatible with each other
in user base and complements

7. Consider a firm that has a resource that is valuable, rare, non-substitutable, and
IMITABLE. Which of the following is most likely be true regarding the competitive advantage
that this resource provides (Lecture 4):
a) Sustainable competitive advantage
b) Temporary competitive advantage
c) Competitive disadvantage
d) No advantage/disadvantage

8. We discussed Porter’s Five Forces in Lecture 4 (also addressed in Schilling, Chapter 6).
Consider a firm, whose largest two customer firms (each representing a large part of the
focal firm’s sales) have been recently merged. What does this merger mean from the
perspective of Five Forces analysis of the considered firm?
a) Higher bargaining power of buyers
b) Lower threat of substitutes
c) Higher bargaining power of suppliers
d) Lower degree of industry rivalry

9. Consider drawing a marble at random from an urn, for which you know the colors of
marbles within the urn, but you do not know how many marbles from each color are present
inside. Such a marble draw is an example of facing ....? (Lecture 5)
a) Uncertainty
b) Risk
c) Radical uncertainty
d) Chance

10. In Lecture 5 and Chapter 7 we discussed different tactics that firms use to set their R&D
budgets. R&D intensity refers to:
a) The ratio of R&D expenditures to sales
b) The costs of an agreed program
c) Previous levels of expenditure
d) None of the above

11. Considering open vs. proprietary platforms (Lecture 7 and Boudreau (2010)), which of the
following statements is true:
a) Completely open platforms help to capture/appropriate more value than proprietary
platforms
b) Proprietary platforms ensure rapid diffusion
c) Open platforms achieve economies of scope in innovation through complementor
efforts
d) Proprietary platforms have weak control of their architecture.

12. Consider that you are the innovation manager for a product under development.
Engineers suggest using a platform architecture (i.e., stable core components with varying
peripheral components) for the new product. For which of the following objectives would a
platform architecture be a POOR solution? (Lecture 7):
a) When you want to reduce R&D lead times for developing variants of the product
b) When you want the product to be customizable by recombining components
c) When you want to share components across variants of the product
d) When you want a very high performance and optimized product

13. Which of the following is NOT a potential risk of forming a strategic alliance? (Lecture 8,
Chapter 8)
a) Effectively sharing knowledge and learning is often too difficult
b) Commitment and coordination structure to facilitate collaboration are often
underestimated
c) A firm runs the risk of opportunism by the other firm and giving away too much
d) A firm runs the risk of becoming a ‘hollow’ firm

14. Which of the following is TRUE for a norms-based intellectual property (IP) regime?
(Lecture 8):
a) A norms-based IP regime relies on explicit and written rules of a given community
b) There is no punishment for violation of IP in norms-based regimes
c) Community members can effectively sanction violators of IP through shame,
denial, and reducing the status of the violator
d) Large electronics and tech companies mostly rely on a norms-based IP regime

15. In order for an innovation to be implemented, according to Adner (2006), firms have to
ensure that there is an alignment between several elements. Which of the following is
FALSE? (Week 4 - Ecosystems)
a) Firms have to align value exchanges (links) between actors in the ecosystems
b) Firms have to find mutual agreement between actors’ roles and position in the ecosystem
c) Firms have to ensure that each actor is satisfied with the activities they perform in the
ecosystem
d) Firms have to ensure that there are formal contracts between all ecosystem actors
16. Ansari et al (2016) describe how the TIVO innovation was confronted with several
coopetitive challenges when it was implemented in the TV ecosystem. They mention the
challenge of intertemporal coopetition. Intertemporal coopetition means that ….
a) an innovation can offer ecosystem members benefits in the future whereas the
innovation’s disruptive effects are felt immediately.
b) an innovation reduces the competitive advantage between the disruptor and an
ecosystem member.
c) the positions and roles of ecosystem members change as a result of the disruptive
innovation.
d) ecosystem members have to innovate their own products and services to create value
from the central/disruptive innovation.

17. Which option below characterizes the stage gate process? (Lecture 10) The stage gate
process …
a) is an innovative way for managing the new product development (NPD) process
b) manages the hand-overs from the marketing department to the engineering department,
to the manufacturing department
c) structures what information to consider for GO/NO GO decisions regarding NPD
projects
d) leads to escalating commitment to NPD projects

18. Which of the statements below is correct? (Lecture 10 Innovation processes)

a) Collaborative communities are organized as competitive markets
b) Collaborative communities are driven only by profit motives
c) Collaborative communities are driven only by extrinsic motivations
d) Collaborative communities are driven by intrinsic and extrinsic motives

19. In Week 6 (and Schilling Chapter 12), four types of team structures were discussed.
Which type generally has the highest degree of cross-functional integration?
a) Autonomous team
b) Functional team
c) Lightweight team
d) Virtual team

20. Since much innovation arises from experimentation and improvisation, the _____
organization structure is typically better suited to creativity and innovation (Week 6).
a) mechanistic
b) formalized
c) standardized
d) organic
OPEN QUESTIONS

QUESTION 21 (max 6 pt)

In Lecture 1 we discussed how Schumpeter theorized on the role of innovation in the
economy. Please explain shortly what he meant by “creative destruction”. In your
explanation, use the example of the ice harvesters or another example.

(The pattern by which superior new innovations arrive by displacing existing firms and jobs -
the latter part is the destructive part. Ice harvesters served large parts of the United States
and outside, until the refrigerator was invented and became widely adopted. Practically all
ice harvesters lost their jobs as a result.)

QUESTION 22 (max 6 pt)

Explain how can it be that aggressive, innovative and customer focused organisations
respond too late to strategically important technological innovations or even ignore them?
(Lecture 2)

(Disruptive technologies were initially developed within the incumbent firms. Marketing
employees explored responses from important customers. Incumbents chose to invest (!) in
sustaining innovations. New companies were started that, through trial and error,
found new markets. These new companies and the performance of their products
moved upwards. The incumbent firms were too late to protect their market share. As such, it
was not because of myopia, a lack of interest or a lack of competences and expertise, but
because they were unable to change their strategy.)

QUESTION 23 (max 6 pt)

What is a dominant design (Lecture 3 and Chapter 3)? Illustrate your explanation with a real-
world example.

(A dominant design is a single product or process architecture that dominates a product

category; it is the ‘de facto standard’, meaning that it was not enforced or acknowledged, but
has become a standard for the industry.)

QUESTION 24 (max 6 pt)

Explain the basic challenge of balancing a firm’s short-term and long-term innovation
ambitions over time and how the three different forms of ambidexterity can help firms to
address these challenges. Briefly explain the three forms of ambidexterity (O’Reilly &
Tushman, 2013).

(Short-term goals are needed to exploit existing products to reap profits from past
investment; the long-term goals are needed to direct innovation plans (explorative activities)
to realize future profits and be successful in the long-term. Ambidexterity proposes that first
should engage in both exploration and exploitation and hence balance the short-term and
long-term goals.)

QUESTION 25 (max 6 pt)

Discuss 1 strength and 1 weakness of discounted cash flows (Lecture 5).

(Strengths: Provide concrete financial estimates, explicitly consider timing of investment and
time value of money. Weaknesses: May be deceptive; only as accurate as original estimates
of cash flows, May fail to capture strategic importance of project, Takes existing situation as
stable (biased against risky and long term innovation)

QUESTION 26 (max 6 pt)

(1) What are the limitations of the economics perspective on platforms according to Gawer
(2014)? (2) Explain how the engineering perspective on platform addresses helps overcome
(some of) these limitations? (Hint: It relates to complementors)

(Economics perspective treats each side as a “customer” - innovators and their motivations
to innovate is purely transactional. Engineering perspective considers how platform
architecture impacts complementors’ motivation for innovation and their content/direction of
innovation)

QUESTION 27 (max 6 pt)

Describe the differences between a blueprint strategy and an adaptive ecosystem strategy.
Ensure that you briefly define both strategies in your answer (Lecture 8).

(Blueprint strategy regards designing a compelling vision of the future ecosystem to motivate
actors to commit and is suggested to reduce uncertainty about the future ecosystem. An
adaptive strategy instead regards ecosystem strategy as both deliberative and emergent and
thus states that it requires continues adaptation)

QUESTION 28 (max 6 pt)

Adner (2006) discusses two types of risks that disruptors of ecosystems may run into. Name
these risks and explain each of them.

(These are co-adoption/Integration risks and co-innovation and interdependence risks. Co

adoption risk is a activity-based challenge and is about partners’ willingness to undertake
certain required activities; Co-innovation risks is also activity-based and refers to partners’
ability to develop the capabilities needed to undertake new activities.)

QUESTION 29 (max 6 pt)

What are two main benefits of using a stage-gate process in new product development?
When describing these benefits, also explain the main characteristics of stage-gate
processes. (Lecture 10, Schilling Chapter 11)
(Postponing committing resources until uncertainty has been reduced, Weeding out
unpromising project early on, It addresses the problem of a manager becoming more and
more committed to a project and not abandoning it when it turns into a lost cause, At each
stage a decision is made, either to go with the project, kill the project, or recycle the project.
Different gates of the stage-gate process control the quality of the project and ensure that
the project is being executed in an effective and efficient manner).

QUESTION 30 (max 6 pt)

Explain the concept of social loafing and how it can be prevented. (Chapter 12, Lecture 11)

(Answer key: When an individual in a team does not exert the expected amount of effort and
relies instead on the work of other team members. The potential for social loafing decreases
when individual team members can be evaluated on their individual performance, when
tasks are perceived as important, and in groups with high levels of social cohesion.)