Question 1

The two main prerequisites for local innovation are the dispersal of organizational assets and resources and a concentration of authority.

Accepted Answer

(The first half is correct, the second is not: "Perhaps the most important factor supporting local innovation is the dispersal of the organizational assets and resources and the delegation of authority that must accompany it.")

Question 2

Globally linked innovations involve processes designed to ensure that the special resources and capabilities of each subsidiary are globally available to other units of the organization.

Accepted Answer

(Globally linked innovation pools the resources and capabilities of many different units - typically at both the parent company and the subsidiary level - to create and manage an activity jointly. It allows the company to take market intelligence developed in one part of the organization, perhaps link it to specialized expertise located in a second entity and a scarce resource in a third, and then eventually diffuse the new product worldwide).

Question 3

Linking local managers to corporate decision-making processes makes them more effective in managing local innovation.

Accepted Answer

(Whereas local resources and autonomy make it feasible for subsidiary managers to be creative and entrepreneurial, linkages to corporate decision-making processes are necessary to make local-for-local tasks effective for the company as a whole).

Question 4

With responsibility for his company's largely centralized R&D activities, Frank worries that the center may not understand local market needs, while the subsidiaries may not be committed to innovations developed at the center. To respond to these concerns, Frank's priority should be to:
A) adopt a single point of contact between headquarters and the subsidiaries to focus the flow of information.
B) ensure that several key people in the foreign subsidiaries are linked to individuals at the headquarters who can represent and defend their views.
C) carefully select the people he interacts with in the subsidiaries in order to reduce conflicting perspectives regarding innovation management.
D) listen to the different national perspectives and priorities, but minimize differences in views from multiple subsidiaries' input.

Accepted Answer

(Two key problems face a company with highly centralized R&D activities; firstly, those at the center may not understand local market needs; and, secondly, those in the subsidiaries required to implement the central innovation may not be committed to it. Building multiple linkages between headquarters and overseas subsidiaries gives headquarters managers a better understanding of country-level needs and opportunities, as well as giving subsidiary managers greater access to and involvement in centralized decisions and tasks).

Question 5

In transnational companies like Unilever, products, functions, and geographic regions are coordinated in a differentiated manner, accounting for the respective demands for integration and responsiveness.

Accepted Answer

(Unilever has moved in sequence from a symmetrical organization managed through a uniformly decentralized federation to a much more differentiated one: differentiating first by product, then by function, and finally by geography.)

Question 6

To make central innovation effective, the purpose of building multiple linkages between headquarters and subsidiaries is to exercise better control over those operations.

Accepted Answer

(Two important problems facing a company with highly centralized operations are that: (i) those at the center may not understand market needs; and, (ii) those in the subsidiaries required to implement the central innovation may not be committed to it. Building multiple linkages between headquarters and overseas subsidiaries gives headquarters' managers a better understanding of country-level needs and opportunities, as well as giving subsidiary managers greater access to and involvement in centralized decisions and tasks).

Question 7

A local-for-local approach to innovation is not compatible with cross-functional integration within national operations.

Accepted Answer

(In fact, the local innovativeness of decentralized federation organizations is enhanced because of strong cross-functional integration that typically exists within each national operation).

Question 8

Frank is director of technology in an MNE in which most of the R&D activities are performed in the parent company's home country, but then, foreign subsidiaries are responsible for introducing the resulting innovations to their local customers. The innovation process adopted by Frank's MNE is:
A) globally linked.
B) local-for-local.
C) center-for-global.
D) locally leveraged.

Accepted Answer

(In the center-for-global innovation model, new opportunities are sensed in the home country; the centralized resources and capabilities of the parent company are brought in to create the new product or process, usually in the main R&D center; and implementation involves driving the innovation through subsidiaries whose role is to introduce the innovation to their local market).

Question 9

The innovation process described as local-for-local implies the decentralization of R&D activities in multiple countries.

Accepted Answer

(Local-for-local innovation relies on subsidiary-based knowledge development. Responding to perceived local opportunities, subsidiaries use their own resources and capabilities to create innovative responses that are then implemented in the local market).

Question 10

Despite the differences that exist among transnational organizations, there is one optimal approach to managing innovation in these firms.

Accepted Answer

(While the textbook chapter discusses three generic approaches that MNEs could employ with respect to their efforts to manage innovation, it must be emphasized that there is no one right way of managing the innovation process in an MNE because each company has its own unique administrative heritage that it cannot and should not disavow).

Question 11

Company X is operating in a fast-changing, knowledge-intensive industry. The most feasible structure for its innovative processes is therefore central-to-global because that allows for a high degree of corporate control.

Accepted Answer

(Even the best-managed central and local innovation processes were rarely sufficient, particularly for companies in fast-changing, knowledge-intensive industries like electronics, biotechnology, and communications. These MNEs required an entirely different set of skills to master what we will call transnational innovation capability.)

Question 12

The greatest risk facing center-for-global innovation is market insensitivity.

Accepted Answer

(In fact, the companies that are most successful at center-for-global innovation strive to ensure that all functional tasks associated with center-for-global innovation are linked to market needs. The development of this important capability has positioned these firms to develop products and processes that are in local demand within the markets of foreign subsidiaries).

Question 13

What is the primary advantage of operating interdependent subsidiaries?
A) It reduces the need to control subsidiaries and to coordinate their activities.
B) It allows the company to integrate scale-efficient operations and to cross-subsidize subsidiaries when necessary.
C) It provides an opportunity to balance the interests of subsidiaries with the needs of the headquarters.
D) It prevents subsidiaries from becoming too independent or uncontrolled.

Accepted Answer

(Firms that foster interdependence among their subsidiaries enjoy two important strategic advantages over firms that do not employ a coordinated global approach: (i) the ability to integrate scale-efficient operations; and (ii) the opportunity to cross-subsidize the losses in one market with the funds generated by profitable operations in other markets)

Question 14

Which of the following does not enhance the efficiency of a local-for-local innovation process?
A) Dispersing assets and resources to the subsidiaries and delegating decision-making authority regarding innovations to them.
B) Assigning competent headquarter managers to lead development projects within a subsidiary.
C) Improving linkages between headquarters and subsidiaries through the use of expatriates.
D) Promoting cross-functional integration at the subsidiary level.

Accepted Answer

(Given that organizational assets and resources are typically dispersed, assigning competent headquarter managers to lead development projects within the subsidiary can detract from the efficiency of a local-for-local innovation process. Instead, the efficiency of local-for-local innovation is enhanced by empowering local managers to manage local development, manufacturing and other functional tasks related to the innovation process).

Question 15

The development of transnational innovation requires that the roles performed by organizational units worldwide are essentially uniform, and that the headquarters manages all of its subsidiaries in the same manner.

Accepted Answer

(Instead of managing all businesses, functions and subsidiaries uniformly, the companies that are the most successful in developing transnational innovations systematically: (i) differentiate the tasks and responsibilities assigned to each business, function or subsidiary; and, (ii) search for complex mechanisms to coordinate the differentiated and interdependent organizational units into sharing a vision of the company's strategic tasks).

Question 16

Transnational innovation requires management processes to be dominated by simple systems of control.

Accepted Answer

(The growing interdependence of organizational units strained the simple control-dominated management systems and underlined the need to supplement existing processes with more subtle and sophisticated ones).

Question 17

Which of the following management assumptions is most likely to support transnational innovation in MNEs?
A) The roles of different organizational units should be uniform and symmetrical.
B) The headquarter-subsidiary relationship should be based on clear and unambiguous patterns of dependence or independence.
C) Career paths should be structured to give managers cross-border and cross-functional experience.
D) Headquarters should be responsible for exercising decision-making and control uniformly.

Accepted Answer

(In many MNEs, three simplifying assumptions (that were employed to reduce organizational and strategic complexity) have effectively blocked the organizational capabilities necessary for supporting and managing transnational innovation processes: (i) the assumption that the roles of different organizational units should be uniform and symmetrical; (ii) the assumption that headquarters-subsidiary relationships should be based on clear and unambiguous patterns of dependence or independence; and, (iii) the assumption that corporate management has a responsibility to exercise decision making and control uniformly).

Question 18

Emerging strategic demands make organizational models based on interdependence the most appropriate form for headquarter-subsidiary relationships.

Accepted Answer

(Emerging strategic demands make: (a) organizational models based on interdependence the most appropriate form for headquarter-subsidiary relationships; and, (b) organizational models based on simple inter-unit independence or dependence inappropriate. Independent units risk being picked off by competitors whose coordinated global approach gives them the following two advantages: (i) the ability to integrate scale-efficient operations and; (ii) the opportunity to cross-subsidize losses from one market with funds generated by profitable operations in other markets. Dependent units run the risk of being unable to respond effectively to strong national competitors or to sense potentially important local market or technical intelligence).

Question 19

Local-for-Local innovative processes can be enhanced through integrating subsidiary functions across different levels. At which level are the control and conflict resolution tasks best concentrated?
A) At the project level (called "article team" at Philips), where relatively junior managers from the commercial and technical functions work together
B) At the product level, where a team of technical and commercial representatives engage in cross-functional coordination
C) At the senior management committee level, where the top commercial, technical, and financial managers in the subsidiary foster subsidiary-level coordination
D) All of the above

Accepted Answer

("At the product level, cross-functional coordination is accomplished through a product group team of technical and commercial representatives, which meets to review
results, suggest corrective actions, and resolve any interfunctional differences. Restraining control and conflict resolution to this level facilitates sensitive and rapid responses to initiatives and ideas generated at the local level." Note that d, while not wrong, is not the best answer because the question asks for the ideal setting.)

Question 20

The most effective way to coordinate knowledge flows in a transnational organization is through the process of formalization.

Accepted Answer

(The socialization process is the classic solution for the coordination of proprietary knowledge and strategic information in a transnational organization).

Quiz 5: Creating Worldwide Innovation and Learning: Exploiting Cross Border Knowledge Management