Industry conditions, market share, and the firm's ability to derive business-line profitability from diverse technological portfolios

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.

Automated summary

The level of diversity in a company's technology portfolio is crucial for its long-term adaptability and financial performance. This study examines the impact of industry conditions and a company's market share on the profitability of diverse technological portfolios. The findings suggest that greater technological diversity enhances profitability when a company has a high market share, low industry concentration, or low industry dynamism. On the other hand, greater technological focus improves profitability when a company has a low market share, high industry concentration, or high industry dynamism.