Chapter 11

Question 1

What is a threat to Sustainability under All Market Structures?

Answer 1

Law

Question 2

What is an imperfectly mobile resource?

Answer 2

The resource cannot “sell itself” to the highest bidder.

Question 3

What are the critical resources necessary for a competitive advantage?

Answer 3

1. Scarcity
2. Immobility
3. Isolating mechanisms

Question 4

What are isolating mechanisms?

Answer 4

1. Impediments to Imitation: impede existing firms and potential entrants from duplicating the resources and capabilities that form the basis of the firm’s advantage.
2. Early-Mover Advantages: Once a firm acquires a competitive advantage, these isolating mechanisms increase the economic power of that advantage over time.

Question 5

What are the impediments to imitation?

Answer 5

1. Legal restrictions
2. Superior access to inputs or customers
3. Market size and scale economies
4. Intangible barriers to imitating a firm’s distinctive capabilities: causal ambiguity,
   dependence on historical circumstances, and social complexity

Question 6

What are early-mover advantages?

Answer 6

1. Learning curve
2. Reputation and buyer uncertainty
3. Buyer switching costs
4. Network effects

Question 7

What is disruptive technology?

Answer 7

Products that offer much higher B – C than their predecessors but do so not through incremental improvements but with entirely new technologies that drastically lower C.

Question 8

What is the resource-based theory of the firm?

Answer 8

Views the resources and capabilities as the critical determinant for their capacity to confer sustainable competitive advantage.

Resource heterogeneity.

Question 9

What are intangible barriers to imitation?

Answer 9

1. Casual ambiguity (cause of a firm’s ability to create more value than its competitors is obscure and only imperfectly understood)
2. Depence on historical circumstances (airlines)
3. Social complexity (toyota reputation)

Question 10

What are the four factors influencing the innovators dilemma?

Answer 10

2. the productivity effect
3. the sunk costs effect
4. the replacement effect
5. the efficiency effect

Question 11

What is the efficiency effect?

Answer 11

The efficiency effect highlights that large established firms have more to lose from another firm’s entry than that firm has to gain from entering the market. Hence, the efficiency effect makes the incumbent’s incentive to innovate stronger than that of a potential entrant.