Chapter 01 Introduction True / False Questions 1. Investing in process innovation helps firms lower their costs. True False 2. Flexible manufacturing technologies have increased the importance of production economies of scale. True False 3. Globalization of markets has reduced the importance of innovation. True False 4. Innovation and new technologies have led to longer product life cycles and slower product obsolescence. True False 5. Technological innovation decreases the amount of output achievable from a given quantity of labor and capital. True False 6. GDP does not directly relate to the amount of goods consumers can purchase. True False 7. Externalities are costs that are borne by individuals other than those responsible for creating them. True False 8. Technological innovation results in complete eradication of negative externalities. True False 9. If a business discharges untreated chemical waste into the local water bodies of a community, it imposes a negative externality on the community members. True False 10. Most innovative ideas do not become successful new products. True False 11. The majority of effort and money invested in technological innovation comes from nonindustrial firms. True False 12. The innovation process is often conceived of as a funnel because most potential new product ideas make it through the development process. True False 13. According to the concept of innovation funnel, the number of successful products launched will be greater than the number of raw ideas generated. True False 14. According to the concept of the innovation funnel, one new idea is usually responsible for several new products. True False 15. A firm's organizational structure and control systems have no influence on the generation of innovative ideas. True False Multiple Choice Questions 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 eliminate 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 short. B. product development cycles have become significantly longer. C. market segmentation has reduced. D. product obsolescence has slowed down. 18. 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 19. 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 the product development cycles. D. Technological innovations increase production costs and reduce product differentiation. 20. 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 for Virtual? A. The life cycle of its cell phones will be very 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. 21. Technological innovations increase: A. the gross domestic product of an economy. B. product life cycles. C. the time required for product development and introduction. D. the production costs of multiple product variations. 22. If a country's GDP stands at $4,867 billion, it means that the country's _____ is 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 due to accelerated product life cycles. B. less developed nations of the world being left behind due to their obsolete technology. C. increased amount of output achievable from a given quantity of labor and capital due to 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. Which of the following is most likely to create a positive externality for its neighboring community members? A. A coal mine B. An organic farm C. A petroleum refinery D. A dye manufacturing company 26. Kroters Inc. decides to set up its manufacturing plant near Woodsville, a small community of farmers. Kroters is most likely to create a positive externality for the community members of Woodsville if it: A. increases its product life cycle based on consumer demand. B. sets up an organic farm near Woodsville. C. follows the Solow Residual. D. reduces 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. Technology is, in its purest essence, _____. A. knowledge B. dissonance C. chaos D. guesswork 29. If a business builds a park in a community, it creates a(n) _____ for the community members. A. social cost B. positive externality C. opportunity cost D. negative variance 30. Which of the following is true of externalities? A. All externalities are negative in nature. B. They are only borne by individuals responsible for creating them. C. Technological innovation results in complete eradication of negative externalities. D. Externalities can be in the form of benefits reaped by individuals. 31. 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. 32. 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. 33. 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. innovation readiness. D. innovation funnel. 34. Unicorn Medicines Inc., a pharmaceutical company based in the United States, has its research and development units spread across the globe. Lately, these research and development units have not been receiving adequate financial support. Which of the following is most likely to be the cause for such a situation? A. Technical innovation leads to lower market segmentation and slower product obsolescence. B. Most innovative ideas do not become successful new products. C. The product development cycle in the pharmaceutical industry is short. D. The cost associated with pharmaceutical research and development is low. 35. Walter is the new director of R&D at Good Health Inc., a pharmaceutical company. Which of the following statements, if made by Walter, would indicate that he believes in the concept of the innovation funnel? A. "Innovation is a freewheeling process that is unconstrained by rules and plans." B. "While there are many potential new product ideas going in the wide end, very few make it through the development process." C. "I believe that Good Health should limit new idea generation to save time and other resources." D. "I believe that Good Health should allow all new ideas generated in the company to make it to the development process." Essay Questions 36. Explain the impact of computer - aided design and flexible manufacturing technologies on firms. 37. Explain how the globalization of markets affects the importance of innovation. 38. What are some of the negative impacts on society due to technological innovation? How would you respond to critics of technological innovation who cite these negative impacts? 39. Why is it important for a company to have a well - defined process for strategically managing its new product development process? 40. Explain how an understanding of the innovation funnel might influence a company's view of research and development. Chapter 01 Introduction Answer Key True / False Questions 1. (p. 1) Investing in process innovation helps firms lower their costs. TRUE Difficulty: 1 Easy 2. (p. 1) Flexible manufacturing technologies have increased the importance of production economies of scale. FALSE Difficulty: 1 Easy 3. (p. 1) Globalization of markets has reduced the importance of innovation. FALSE Difficulty: 1 Easy 4. (p. 2) Innovation and new technologies have led to longer product life cycles and slower product obsolescence. FALSE Difficulty: 1 Easy 5. (p. 2) Technological innovation decreases the amount of output achievable from a given quantity of labor and capital. FALSE Difficulty: 1 Easy 6. (p. 3) GDP does not directly relate to the amount of goods consumers can purchase. FALSE Difficulty: 1 Easy 7. (p. 3) Externalities are costs that are borne by individuals other than those responsible for creating them. TRUE Difficulty: 1 Easy 8. (p. 3) Technological innovation results in complete eradication of negative externalities. FALSE Difficulty: 1 Easy 9. (p. 3) If a business discharges untreated chemical waste into the local water bodies of a community, it imposes a negative externality on the community members. TRUE Difficulty: 2 Medium 10. (p. 4) Most innovative ideas do not become successful new products. TRUE Difficulty: 1 Easy 11. (p. 4) The majority of effort and money invested in technological innovation comes from nonindustrial firms. FALSE Difficulty: 1 Easy 12. (p. 5) The innovation process is often conceived of as a funnel because most potential new product ideas make it through the development process. FALSE Difficulty: 1 Easy 13. (p. 5) According to the concept of innovation funnel, the number of successful products launched will be greater than the number of raw ideas generated. FALSE Difficulty: 1 Easy 14. (p. 5) According to the concept of the innovation funnel, one new idea is usually responsible for several new products. FALSE Difficulty: 1 Easy 15. (p. 6) A firm's organizational structure and control systems have no influence on the generation of innovative ideas. FALSE Difficulty: 1 Easy Multiple Choice Questions 16. (p. 1) 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 eliminate the need for differentiation from competitors. D. They have reduced the importance of technological innovation in industries. Difficulty: 2 Medium 17. (p. 2) As a result of the rapid pace of innovation: A. product life cycles have become short. B. product development cycles have become significantly longer. C. market segmentation has reduced. D. product obsolescence has slowed down. Difficulty: 1 Easy 18. (p. 2) 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 Difficulty: 1 Easy 19. (p. 2) 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 the product development cycles. D. Technological innovations increase production costs and reduce product differentiation. Difficulty: 2 Medium 20. (p. 2) 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 for Virtual? A. The life cycle of its cell phones will be very 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. Difficulty: 3 Hard 21. (p. 2) Technological innovations increase: A. the gross domestic product of an economy. B. product life cycles. C. the time required for product development and introduction. D. the production costs of multiple product variations. Difficulty: 2 Medium