Birkinshaw - Business and Technology in the Industrial Era

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Questions and Answers

What significant shift did the transition to the 'industrial era' bring about?

A stagnation in the market for digital goods.

A reduction in the scale and scope of firms.

A fundamental change in the nature of firms, their organisation, and the creation of new supporting institutions. (correct)

The enforcement of older institutional structures.

Why are government policies struggling to regulate tech giants like Facebook and Google?

Because those tech giants are too powerful to regulate.

Because policies are designed for traditional linear markets and not for platform-based business models.

Because those policies were largely developed in the industrial era, when user data was not a major concern. (correct)

Because current policies are fully adequate for tech giants but they are not enforced

How does increased transparency due to information technology affect dispute resolution between firms?

It leads to an increase in the number of disputes.

It facilitates easier resolution of disputes and problems. (correct)

It has little to no impact on dispute resolution.

It makes disputes more complex and harder to solve.

According to the content, what is a key characteristic of platform-based business models?

They have demonstrated superiority in markets for digital goods compared to traditional linear models. Signup and view all the answers

What is the main purpose of smart contracts being experimented with by leading-edge blockchain firms?

To specify and execute transactions with no human involvement. Signup and view all the answers

What does the paper suggest about the pace of change in firms and institutions?

Changes in firm size and scope are occurring more rapidly than changes in internal organization, which in turn are evolving more rapidly than institutional structures. Signup and view all the answers

What is the implication of falling transaction costs on the benefits of firms as entities that internalize transactions?

The benefits of firms decrease considerably. Signup and view all the answers

What is a key tension identified in the text resulting from differing paces of change?

Tension between digital and traditional firms, and also between digital firms and policymakers. Signup and view all the answers

What does the term 'vertical scope' of a firm refer to?

The number of linked segments in a single value-chain a firm participates in. Signup and view all the answers

What does the term 'horizontal scope' of a firm refer to?

The number of customer-facing markets a firm competes in. Signup and view all the answers

What type of innovation is needed for traditional firms to take benefit of the digital revolution?

Management innovation (new ways of working) and institutional innovation (new policies and regulations). Signup and view all the answers

Historically, how did many firms operate regarding vertical integration in the post-war years?

They operated in a vertically integrated manner with many linked segments in the value chain. Signup and view all the answers

In the context of the paper, what does the phrase 'digital era' primarily refer to?

The current period characterized by significant advancements and changes from digital technology. Signup and view all the answers

What led firms like Ford and IBM to move away from vertical integration?

The realization that vertical integration was inefficient and lacked flexibility. Signup and view all the answers

What does the paper suggest should be done to fully realize the potential of the digital revolution?

Embrace both management innovation and institutional innovation. Signup and view all the answers

Which factor has largely caused some industries, such as oil and gas, to retain a vertically integrated structure?

Concerns about the volatility of input prices. Signup and view all the answers

What is a primary characteristic of the traditional sector of the economy as described in the content?

Paying lower wages despite employing larger numbers of people. Signup and view all the answers

According to the passage, what is a common consequence of traditional firms attempting to become more digital?

Higher levels of investment in automation and outsourcing. Signup and view all the answers

What does the text suggest typically happens to firms that become dominant?

They may lose their position through enforced break-ups or new competitors. Signup and view all the answers

What does the passage say is a consequence of increased automation and outsourcing by traditional firms?

A tendency toward fewer jobs. Signup and view all the answers

What is meant by the term 'creative destruction'?

The long-term positive, but short-term costly impact of firms failing. Signup and view all the answers

What is a noted trend regarding the lifespan of firms on the S&P 500, according to the content?

The lifespan has decreased significantly over the last 30 years. Signup and view all the answers

What does the text suggest is a possible outcome of allowing large digital firms to continue without major intervention?

A natural evolution through creative destruction. Signup and view all the answers

What is identified as a key difference between traditional and digital firms, as described in the passage?

Digital firms utilize control over information and capital flows, while traditional firms employ capital and people in traditional ways. Signup and view all the answers

What is a key characteristic of the standard bureaucratic model of work?

A clear hierarchy with legitimate authority of individuals over others. Signup and view all the answers

How has technological change impacted decision-making in modern firms?

It has pushed the focus towards making decisions using collective wisdom. Signup and view all the answers

What does 'linear alignment' refer to in the context of objective-setting?

Defining long-term, intended outcomes and planning specific targets to achieve them. Signup and view all the answers

What is a drawback of using linear alignment for objective-setting in today's business environment?

It can be difficult to adjust to rapidly changing conditions in the marketplace. Signup and view all the answers

What is the concept of 'obliquity' in the context of objective-setting?

Achieving goals by pursuing them indirectly, not directly. Signup and view all the answers

What assumption is 'Theory X' based on, regarding employee motivation?

Employees are best motivated by financial incentives and rewards. Signup and view all the answers

Compared to industrial-era firms, what is a key change in how digital-era firms make decisions?

Digital firms increasingly use the aggregated insights of their workforce. Signup and view all the answers

What method of pursuing objectives do digital-era firms primarily use?

Using fluid objective-setting procedures and broader expressions of purpose. Signup and view all the answers

What is a primary focus of digital-era firms regarding employee motivation?

Fostering intrinsic motivation through autonomy and purpose. Signup and view all the answers

Which of the following is NOT typically associated with intrinsic motivation in the workplace?

Focusing solely on performance-based bonuses. Signup and view all the answers

What significant shift has been observed in the work preferences of younger generations, such as Generation Y and Z?

Greater open-mindedness towards changing jobs and careers. Signup and view all the answers

How has technology influenced the world of entrepreneurship according to the text?

It has democratized it, making it easier for anyone with an idea to be an entrepreneur. Signup and view all the answers

Which of the following digital capabilities is NOT highlighted as an enabler for freelance work?

Requirement for specialized and expensive equipment. Signup and view all the answers

What is a key impact of the digital revolution on the ease of individual work?

Greater ease of working remotely. Signup and view all the answers

Which management idea is NOT closely aligned with the principles of digital-era firms?

Rigid hierarchical control structures. Signup and view all the answers

What is a common trend that enables workers to rethink their relationship with employers due to the digital revolution?

A general upskilling in the workplace that increases both means and motivation to work independently. Signup and view all the answers

Which of the following best describes the current state of intellectual property ownership rules in the context of digital production?

They have successfully adapted through innovations such as the General Public License. Signup and view all the answers

According to the content, which of these areas is experiencing the most difficulty in adapting to the digital era?

Audit and measurement of firm activities Signup and view all the answers

What is identified as the underlying difficulty across most institutions when dealing with digital firms?

The difficulty of valuing information, especially customer data Signup and view all the answers

What is suggested as a potential solution to address the power of dominant digital firms?

Finding a way of pricing data transparently and acceptably to individuals Signup and view all the answers

What is meant by 'institutional innovation' in context of the content?

The creation of innovative policies and regulations to support new ways of working in the digital age. Signup and view all the answers

In the content, what role is attributed to Richard Stallman's General Public License?

A rare example of institutional innovation supporting digital-era business models. Signup and view all the answers

According to the content, what is a key trend that is relevant across the multiple aspects that were reviewed?

The trend towards computer-based automation and its impact on future job opportunities. Signup and view all the answers

What does the content suggest regarding the future job market in the context of the digital revolution?

Smaller number of jobs likely to be available due to automation. Signup and view all the answers

Study Notes

Technological Change Affecting Corporations

Technological advancements (digital revolution) are causing fundamental changes in firm size, scope, and organizational structure.
Large, vertically integrated industrial-era firms are being replaced by narrower, specialized firms using digital platforms to connect buyers and sellers.
Traditional bureaucratic organizational structures are giving way to flatter, more fluid structures.
The shift is happening more quickly than the institutional structures surrounding firms.
This creates tensions between established and digital firms, and between firms and policymakers.

Public Policy Considerations

Current tensions between governments and large digital firms are due to the disconnect between existing regulations (industrial-era norms) and the demands of digital firms.
There's a need for institutional innovations to address these tensions.
Policymakers need to consider the implications of the digital revolution for firm size, scope, and the fundamental choices firms make.

Firm Size and Scope

Digital firms often have greater economies of scale and scope, with larger firms likely to become even larger.
Digital products often experience network effects, meaning value increases with more users.
Switching costs can be high.
Digital products are non-rivalrous, which means many people can use the same product.

Firm Structure and Organization

Digital technology enables more efficient information collection and sharing, leading to flatter organizational structures.
Collaboration and work can be enabled in real time, even when employees are not co-located.
Work is becoming more modularized.
Traditional hierarchical structures are being replaced by more fluid, adaptable structures that can respond more quickly to change.
Employee-firm relationships are changing, moving away from traditional employment and toward freelance work.

Institutional Structures

The institutional structures surrounding business are lagging behind the changes in firms.
Changes are being made, but slowly.
There is a need for new governance models.
Existing regulations (laws and polices) often need updating to align with new business practices in the digital age.

Measurement and Audit

Existing accounting standards are struggling to value intangible assets of digital firms.
Digital firms' value is often in intangible assets such as data and relationships.
Existing accounting methods are too traditional to capture the nuances of intangible assets and the digital economy.

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Description

Explore the significant changes brought about by the transition to the industrial era, particularly in relation to technology and business models. This quiz addresses issues such as government regulation of tech giants, the role of smart contracts, and the impact of information technology on firm dynamics. Test your understanding of key concepts like transaction costs and innovation strategies in the digital age.