With external innovation becoming more and more important, many firms struggle with the question of how to balance their technology-sourcing portfolio. This study addresses this issue by looking at the effects of portfolio diversity on performance outcomes and the conditions under which diversity is most likely to materialize. Using a dataset of strategic investments by pharmaceutical firms, the results show that the variance in relative technological proximity between the focal firm and its partners exhibits an inverted U-shaped relationship with innovative performance and that this relationship is affected by the diversity of the external sourcing modes used in the portfolio.

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This article investigates how prior corporate venture capital (CVC) relationships between two firms affect the likelihood of their subsequently entering a strategic alliance. Creating a portfolio of CVC investments provides the investing firm with a set of opportunities that can be pursued once the technological and market uncertainty have been reduced. If the technology appears to be promising, a follow-on investment, such as a strategic alliance, is made to ensure the transfer of the technological knowledge. This article shows that prior CVC investments can play a role in the formation of strategic alliances and investigates the conditions under which they are most likely to do so.

Given the increasingly high cost of new product development (NPD), it is important for firms to terminate unsuccessful NPD projects as soon as possible. This article investigates the role of intellectual capital in the discontinuation of NPD projects. The three dimensions of intellectual capital (human, structural, and social capital) are posited to decrease the likelihood of discontinuation of NPD projects, while contextual factors such as the firm's discontinuation experience and the size of the drug development portfolio are expected to affect this relationship. The research model is tested using a unique data set of 1,168 drug discovery and development projects. The results suggest that NPD projects rich in all three dimensions of intellectual capital are less likely to be discontinued. The size of the firm's drug development portfolio, however, is found to mitigate these effects, while discontinuation experience enhances the relationship between intellectual capital and discontinuation duration. As only a fraction of new product development initiatives result in success, timely discontinuation of unsuccessful projects is critical for sustained performance of organizations. Our findings make an important contribution to this stream of work. By highlighting the role of intellectual capital in the discontinuation process, we offer an interesting twist to the literature that invariably assumes intellectual capital to be important for innovation.