Abstract
The level of diversity within a company’s technology portfolio is one of the most important factors impacting its long-term adaptability and financial performance. In this study, we investigate how industry conditions, as well as a firm’s market share within the industry, have systematic influences on the profitability of diverse technological portfolios. Using matched patent and performance data across all US manufacturing industries from 1976 to 2006, we show that greater technological diversity increases the firm’s profitability when (1) it has a high market share, (2) there is a low level of industry concentration, or (3) there is a low level of industry dynamism. In contrast, greater technological focus increases the firm’s profitability when it has a low market share, there is a high level of industry concentration, or there is a high level of industry dynamism.