Deck 16: Organization Structure for Technology Strategy

Question 1

An advantage of decentralization is that it reduces conflict with ongoing operations.

Answer 1

False

Question 2

A disadvantage of decentralization is that it leads to avoidance of radical innovation.

Answer 2

True

Question 3

Organic structures are loosely controlled with hierarchical communication patterns and specialized jobs.

Answer 3

False

Question 4

Mechanistic structures permit greater organizational flexibility and adaptability than mechanistic ones.

Question 5

Successful high-technology firms typically build in slack resources to encourage innovation.

Question 6

Efforts to make organizations more efficient usually involve the elimination of slack resources because they are viewed as a drag on efficiency.

Question 7

On average, small firms can hire a more talented and more diverse group of employees than large ones, which improves the quality of their human capital.

Question 8

Small firms tend to be more innovative than large firms in industries that are younger, less R&D intensive, less concentrated, less capital intensive, less advertising intensive, and more reliant on skilled labor.

Question 9

Research has shown that more than 80 percent of all firms are founded in the same industry as the one in which their founders were previously employed.

Question 10

The disagreement with employees about how to divide the profit from innovation between them is the most basic explanation for why people create spin-off companies.

Question 11

External equity investment in technology start-ups typically comes from venture capitalist.

Question 12

Business angels are private individuals who invest their own money in new companies.

Question 13

New venture groups are entities that invest a business's money in start-up companies in return for an equity interest in them.

Question 14

Corporate venture capital funds use a venture capital approach to corporate venturing, frequently coinvesting with other financial institutions.

Question 15

Although the number of corporate venture groups peaked around 2003, it is still higher than it was in 1999.

Question 16

When companies engage in corporate venturing, they usually need to take the strategy of a parent firm into consideration and can't maximize financial returns, like independent venture capitalist.

Question 17

An advantage of corporate venturing is that it reduces risks on companies.

Question 18

A disadvantage of corporate venturing is that it can interfere with ongoing operations.

Question 19

If the corporate ventures are strategically important and operationally related to your core capabilities, then the new ventures should be part of your core business.

Question 20

If the corporate ventures are strategically important and operationally unrelated to your core capabilities, then the new ventures should be direct spin-offs.

Question 21

Acquisitions allow companies to gain control over proven new technical capabilities and intellectual property.

Question 22

In general, the returns to shareholders of acquiring companies tend to be better than anticipated, especially in the short-term.

Question 23

To innovate successfully, companies need to be concerned with which of the following factors?

A) centralization
B) efficiency
C) creating new companies
D) all of the above

Question 24

What refers to the extent to which decision making in an organization is controlled at the top?

A) mechanistic
B) organic
C) centralized
D) decentralized

Question 25

What refers to the extent to which decision making in an organization is spread out throughout an organization?

A) mechanistic
B) organic
C) centralized
D) decentralized

Question 26

What is an advantage with decentralization?

A) facilitates innovation in noncore areas
B) leads to avoidance of radical innovation
C) decreases market orientation
D) makes coordination easier

Question 27

What is a disadvantage of decentralization?

A) results in overinvestment in large-scale innovation
B) hinders strategic management innovation
C) reduces market innovation
D) reduces idea generation

Question 28

As Microsoft grew, its centralized structure made it slow to take advantage of innovative opportunities. What advantage of decentralization was the company trying to exploit by dividing the company into seven different divisions; each with its own division responsible for profit and loss and a goal of speeding up decision making?

A) improves access to information
B) facilitates innovation in noncore areas
C) facilitates idea generation
D) improved coordination

Question 29

What is a benefit associated with decentralization?

A) reduces the cost of coordination
B) improves performance by giving technical personnel freedom from operations activities
C) encourages companies to invest in radical innovation
D) facilitates innovation in noncore areas

Question 30

What is a benefit of centralization?

A) encourages companies to invest in radical innovation
B) increases market orientation
C) reduces financial risk to the overall organization
D) makes it easier to get government aid for innovation

Question 31

What was 3M attempting to do by changing its structure so that the managers of all units undertaking R&D report to the same senior manager?

A) increase the mechanistic nature of the organization
B) increase the organic nature of the organization
C) increase the centralization of the organization
D) increase the decentralization of the organization

Question 32

What type of organization is loosely structured with nonhierarchical communication patterns and unspecialized jobs?

A) mechanistic
B) organic
C) centralized
D) decentralized

Question 33

What type of organization is tightly controlled with hierarchical communication patterns and specialized jobs?

A) mechanistic
B) organic
C) centralized
D) decentralized

Question 34

What is most accurate concerning organic structures?

A) they permit less organizational flexibility but are more adaptable
B) they permit less organizational flexibility and are less adaptable
C) they permit more organizational flexibility and are more adaptable
D) they permit more organizational flexibility but are less adaptable

Question 35

What is most accurate concerning organic structures?

A) more cross-functional activity and greater horizontal communication
B) more cross-functional activity but less horizontal communication
C) less cross-functional activity but greater horizontal communication
D) less cross-functional activity and less horizontal communication

Question 36

What is an advantage associated with mechanistic structures compared to mechanistic ones?

A) work is less structured
B) more efficient
C) permits less monitoring
D) makes it more difficult to evaluate employees

Question 37

Which factor is more in-line with the creation of radical innovation?

A) efficient decision-making processes
B) authority structures
C) participative decision making
D) all of the above

Question 38

What was General Motors attempting to do by resisting the pressure to cut R&D in the light of widespread financial pressures?

A) increase efficiency
B) reduce costs
C) focus on the long-term as compared to the short-term
D) eliminate dead-end costs

Question 39

What is more consistent to a large firm compared to a small one?

A) large firms make decisions faster
B) large firms are less bureaucratic
C) larger firms have faster communication
D) large firms have more complex communication

Question 40

What is more consistent with a large firm as compared to a larger one?

A) large firms have an increased ability to colocate marketing and engineering
B) large firms promote fewer talented researchers to management positions
C) large firms produce innovation at a lower cost of R&D
D) large firms improve the quality of human capital

Question 41

What is more consistent of a small firm as compared to a large one?

A) small firms generate more slack necessary to innovate
B) small firms produce their innovations at a lower cost of R&D
C) small firms exploit economies of scale
D) small firms hire a more talented and diverse group of employees

Question 42

Small firms tend to be more innovative in which type of industry?

A) less advertising intensive
B) older industries
C) more concentrated
D) less reliant on skilled labor

Question 43

Which industry would you expect a small firm to be more innovative than a large one?

A) pharmaceutical preparations
B) photographic equipment
C) fabricated metal products
D) measuring and controlling devices

Question 44

Which industry would you expect a large firm to be more innovative than a small one?

A) pharmaceutical preparations
B) photographic equipment
C) fabricated metal products
D) measuring and controlling devices

Question 45

What percentage of all firms are founded in the same industry as the one in which their founders were previously employed?

A) 40 %
B) 60%
C) 80%
D) 90%

Question 46

What percentage of all firm founders start companies to serve the same or similar customers as their prior employers?

A) 40%
B) 60%
C) 80%
D) 90%

Question 47

What is a reason why so many employees leave to start their own spin-off company?

A) lack of reward sharing
B) inability to effectively bargain over profits
C) inability go agree on a source of value
D) all of the above are reasons

Question 48

What led Robert Metcalfe to quit Xerox and start 3Com?

A) disagreement over dividing profits
B) lack of sharing rewards
C) inability to agree on a source of value
D) all of the above

Question 49

What is the most basic explanation why people spin-off companies?

A) lack of shared rewards
B) disagreement over dividing profits
C) ineffective leadership
D) inability to agree on a source of value

Question 50

What can keep an employee from exploiting innovations that were identified while working for another company?

A) noncompete agreements
B) patents
C) nondisclosure agreements
D) all of the above

Question 51

External equity investment in technology start-ups typically comes from which source?

A) corporations
B) business angels
C) venture capitalists
D) all of the above

Question 52

What are private individuals who invest their own money in a new company called?

A) corporate venturing
B) venture capital firm
C) business angels
D) venture capitalist

Question 53

What are organizations, generally limited partnerships, called that raise money form university endowments, pension funds, and wealthy individuals to invest in high-technology start-ups called?

A) venture capitalist
B) business angels
C) venture capital firm
D) corporate venturing

Question 54

What is the creation of new businesses by existing organizations called?

A) business angels
B) corporate angels
C) venture capitalism
D) corporate venturing

Question 55

In 2003, approximately how many U.S. companies operated corporate venture capital units?

A) 200
B) 350
C) 500
D) 750

Question 56

Corporate ventures accounted for what percentage of all venture capital funds invested in the U.S.?

A) 7 percent
B) 12 percent
C) 17 percent
D) 22 percent

Question 57

What are corporate units that create new companies under the umbrella of the parent firm called?

A) business angels
B) new venture group
C) corporate venture capital funds
D) venture capitalists

Question 58

What is most likely for corporate venture capital funds?

A) following of a corporate approach
B) make smaller investment alone
C) seek to maintain ownership of the new company
D) staging their investments

Question 59

What is most likely for corporate venture groups?

A) making larger investments
B) coinvesting with other financial institutions
C) seek to maintain ownership of the new companies
D) staging of investments

Question 60

What is most accurate regarding the amount of money invested in corporate venture groups since the late 1990s?

A) they have continued to increase
B) they have continued to decrease
C) they peaked around 200 and have since declined
D) they peaked around 2003 and have since declined

Question 61

Which of the following is most likely managed like a corporation?

A) venture capitalist
B) corporate venture group
C) corporate venture capital funds
D) business angels

Question 62

What is the primary objective when companies conduct corporate venturing?

A) purely financial goals
B) purely strategic goals
C) primarily financial goals
D) equally financial and strategic goals

Question 63

What is a disadvantage associated with corporate venturing?

A) increased dependency on mainstream customers
B) eliminates equity as an incentive to motivate employees
C) interferes with ongoing operations
D) reduces the possibility of radical innovation

Question 64

What is an advantage associated with corporate venturing?

A) frees companies from dependence on mainstream customers
B) reduces financial, legal, and accounting burdens
C) helps maximize financial returns on investments
D) reduces risks on companies

Question 65

If a company's core venture is strategically important and the core capability is related, the new venture should be:

A) part of the core businesses
B) a special unit
C) a contractually-based spin-off
D) a direct spin off

Question 66

If a company's core venture is strategically important and the core capability is unrelated, the new venture should be:

A) part of the core businesses
B) a special unit
C) a contractually-based spin-off
D) a direct spin off

Question 67

If a company's core venture is of no strategic importance and the core capability is related, the new venture should be:

A) part of the core businesses
B) a special unit
C) a contractually-based spin-off
D) a direct spin off

Question 68

If a company's core venture is of no strategic importance and the core capability is unrelated, the new venture should be:

A) part of the core businesses
B) a special unit
C) a contractually-based spin-off
D) a direct spin off

Question 69

What is an advantage associated with acquisitions?

A) gaining control over proven new technical property
B) gaining knowledge how to serve a market
C) enhance efficiency by combining operations and eliminating duplicative assets
D) all of the above

Question 70

What advantage of acquisitions was SBC Communications attempting to leverage with the acquisition of AT&T allowing the combined company to reduce R&D activities, headquarters staff and other operations?

A) gain control over proven new technical property
B) enhancing efficiency by combining operations and eliminating duplicative assets
C) manage the risk of investing in the development of new technologies
D) putting their capabilities to work in new markets

Question 71

What advantage of acquisition was Novartis attempting to leverage when it acquired biotechnology pioneer Chiron to gain access to the latter's vaccine development capabilities and to take advantage of the increasing size of the vaccine market that has resulted from fears of Avian flu?

A) gain control over proven new technical property
B) gain knowledge about how to serve a market they would like to enter
C) manage the risk of investing in the development of new technologies
D) putting their capabilities to work in new markets

Question 72

Define centralization and decentralization and explain the advantages and disadvantages of each.

Question 73

Define mechanistic and organic organizational structures. Which structure is better at encouraging innovation? Why?

Question 74

Discuss the main reasons why spin-off companies are formed.

Question 75

Explain how high-growth technology companies finance their operations. Discuss the advantages and disadvantages associated with corporate venturing.