Part 7

Question 1

Resource-based Theory of the Firm

Answer 1

Explains sustained comp. advantage in terms of heterogeneity in resources & capabilities

Question 2

Resources and capabilities have to be…

Answer 2

1. Scarce
2. Imperfectly mobile
3. Unavailable in the open market

Question 3

Cospecialisation:

Answer 3

A firm’s resources are uniquely valuable in combination

Question 4

Tangible resources:

Answer 4

1. Organisational resources
2. Physical resources
3. Technological resources

Question 5

Intangible Resources

Answer 5

1. Human resources (knowledge, trust, organ. routine)
2. Innovation resources (ideas, scientific knowledge)
3. Reputation resources (brand name, perception)

Question 6

Capabilities (examples)

Answer 6

• Distribution
• Human resources
• Marketing
• Management
• Manufacturing
• RD

Question 7

Impairments to Imitation

Answer 7

Impede potential entrants from duplicating resources and cap. of incumbent
(legal restrictions, superior access to input/consumers, market size, economies of scale, intangible barriers)

Question 8

Early Mover Advantage

Answer 8

1) Learning Curve
2) Reputation, Buyer Certainty
3) Switching costs
4) Network effects

Question 9

Actual vs. Virtual Networks

Answer 9

1) Arise from how many people use the product/service

2) Arise from the use of complementary goods

Question 10

Early Mover Disadvantages

Answer 10

• not enough complementary goods developed yet
• technology might not be as good as of followers
• likely to make most mistakes as first one in a market

Question 11

Innovation can be..

Answer 11

1) Product Innovation

2) Process Innovation

Question 12

Innovation 2 types:

Answer 12

a) Incremental

b) Radical

Question 13

Discontinuities are

Answer 13

small shocks due to incremental innovation

Question 14

Disruptive technologies –

Answer 14

Markets become clear of less efficient processes and org. forms are displaced (higher B-C bc of a much LOWER C); MP3 replacing CDs

Question 15

Hypercompetition

Answer 15

Firms constantly seek comp, advantage; Apple & Samsung products

Question 16

According to Schumpeter…

Answer 16

tech. improvement & long-term economic growth are MORE important than an optimal allocation of resources

Question 17

Dynamic vs Static Efficiency

Answer 17

Society benefits more from competition between products, than from price competition (argument to defend monopoly)

Question 18

Innovator’s Dilemma

Answer 18

innovation by incumbents may cannibalise their successful business model, while failure to innovate may invite entry

Question 19

When not to innovate (effects):

Answer 19

1) Sunk cost effect (profit max. firm sticks to current technology, even though a new profit max. firm would choose a different option)
2) Replacement effect (entrant is more willing to spend on innovation as they can replace the incumbent, whereas the incumbent has nobody to replace)
3) Efficiency effect (monopolist has more to lose from another firm’s entry than the firm can gain from entering a market, so monopolist has a larger incentive to invest)

Question 20

Productivity effect:

Answer 20

large firm may take advantage of scope economics and be more productive at research