lecture 3

Question 1

Firm growth and firm size (2 things)

Answer 1

the small firm eventually gains economies of size

As a corollary, firms with greater size continually ejoys excess capacity and unused resources

Question 2

How are firms unused resources managed

Answer 2

core organizational problem - size increases the cost of monitoring and coordination of activities

Inducements for t he management team and administrative structure

Opportunities

Question 3

resources:

In the context of Innovations & technology management, there is a complex interplay among three unique factors -

Answer 3

resources, managerial inducements, and uncertainty

Question 4

The adaptation problem for the large firm

Answer 4

while firm size imposes organizational inertia and path dependencies, a firms adaptation to changes in external environment is crucially shaped by how managers organize the internal aspects of firms (illustrated above), helping firm-addaptation to secure a long term strategy

Executive examples:
1. microsofts adaptation of its business model and technological focus

2. Philips reorganizing its business focus towards medical technologies

Question 5

A resources- and managerial- based understanding of large firms

Performance differences among firms in the same industry:

Answer 5

Internal firm level factors

Question 6

Internal firm level factors (a resources- and managerial-based understanding of large irms)

Answer 6

core assets and competencies
These are unique strengths deep inside that differentiate a firm

Managerial intentionality
This means that top level managers seek to balance private and common interests; recall the principal-agent problem

Innovative performance = superadditive function of resources and managerial incentives
ITM = f(resources) + g(managerial inducements) + h(Resources * managerial inducements)

Strategic fit
This means that the value of assets and competencies change with external environment

Question 7

A firms goal (A resources- and managerial-based understanding of large firms)

Answer 7

A firms goal is to continually invest in development and renewal of their technological asset and competence base to achieve a strategic fit with the market environment

Question 8

Three types of assets

Answer 8

Tangible

Intangible

Human

Question 9

Tangible assets

Answer 9

1) financial (cash, securities, borrowing capacity)

2) Physical (plant, equipment, land, mineral reserves)

Question 10

Intangible assets

Answer 10

1) technology (patents, copyrights, trade secrets)

2) reputation, brands, relationships)

3) culture

Question 11

Human assets

Answer 11

1) skills/know how
2) capacity for communication and collaboration
3) motivation

Question 12

Continual updating of capabilities

Functional capabilities (def)

Answer 12

Funcional areas such as operations, purchasing, logistics/SCM, design, engineering, R&D and new product development, marketing, distribution and sales, customer service, and financial management

Capabilities across a firms value chain activities

Organizational capabilities - coordination and orchestration among functional areas

Question 13

A simple representation of the key organizational issues for large firms in the management of innovation

Answer 13

Information (e.g. costs) + know how (e.g. divisionalize) –> sales to current markets AND Capability updating

Capability updating coms from this and external learning (e.g. acquisitions, joint ventures, new people) and internal learning (e.g. reorganizing, accidents, experiments) as well as organizing and technological opportunities

Organizing and technological opportunities stem from Market opportunities

While it may appear straightforward, in reality, managing “capability updating” is an organizationally costly and intensive activity

Question 14

Dynamic perspective to asset and capability updating

Imagine assets and capabilities as stocks and flows

Answer 14

A firm can modify its asset and capability base to gain and sustain a competitive advantage (corporate renewal)

e.g. Consider honda motor company

Honda is known for its prowess in combustion engine design and technology, however, it could decrease in value as consumers move toward electric powered cars, its current competency dissipates

How to strategize new technology development - invest in current battery technologies? or wait for new technological advancements

There are so many other examples: e.g. Google, apple or shell

Question 15

Role of inflows and outflows in building distinctive competencies

Answer 15

Inflows: investments in resources

Intangible resources (dynamic capabilities, new product development, engineering expertise, innovation capability, reputation for quality, supplier relationships, employee loyalty, corporate culture, customer goodwill, know-hoq, patents and trademarks)

outflows: Leakage, forgetting

Imagine investment in resources to be the wasserhahn and the wasserbad is the intangible resources

Question 16

Decision making under uncertainty - major questions for managers

Answer 16

1) who are most likely to use this; how big can this market get; what is the cost of marketing (creating awareness)

2) How much improvement does the innovation provide over previous solutions

3) does the innovation require enabling technologies (new knowledge, materials et cetera), and are these sufficiently mature and available

4) does the firm have resource sto accelerate market acceptance

5) how critical are complementary assets and are they available

6) how high is the threat of competitive entry

7) Can the firm withstand early losses (is there financial slack to absorb initial setbacks)

8) is the industry likely to experience network externalities opportunities

Question 17

Internal factors of the firm

Answer 17

1) effectively tapping into individuals repertoire of existing skills and building new skills

2) incentive systems in place to encourage employees to try and develop new ideas, experiment and make mistakes

3) encourage cross-functional team activities (often times challenging)

4) The whole idea is to create a culture of innovation among employees (who are more like shareholders of the productive output of the firm)

Question 18

Organizational decisions

Answer 18

information, information and more information (market intelligence)

Decision-making under uncertainty about future returns and scope

Uncertainty about investments in resources (what do we need)

1) board of directors
2) top level managers
3) divisional managers
4) other manager/team leaders

Costs, quality and functional value –> it is about balancing these three dimensions of a product/service innovation

Question 19

Key organizational drivers in a corporate firms innovation strategy:

Internal champions and gatekeepers

Answer 19

1) senior executives have the power and authority to support and drive a project

2) they make important resource allocation decisions

3) They are also critical for ensuring cooperation and coordination among units

4) THey must have the skills and knowledge to carefully evaluate a project is going well and does not escalate costs for the company

Question 20

Key organizational drivers in a corporate firms innovation strategy

Value chain linkages with customers and suppliers

Answer 20

1) customer centric appraoch helps better coordination of resources and activities for innovation

2) manage product and technological innovations by engaging with sophisticated consumers (lead users)

3) likewise, close cooperation with suppliers expands firms knowledge and helps improve production efficiencies

Question 21

Need for external sourcing of innovation

Answer 21

Pressure that firms face due to environmental changes and competition

Limited capabilities to adjust to changes; lack of relevant up-to-date complementary information and assets

Time-compressed diseconomies of scale and scope

Flexibility and uncertainty

Pressure to act and respond fast

Question 22

External options for corporate firms

Answer 22

Labour markets vs Strategic alliances/partnerships vs strategic networks vs acquisitions