New Challenges in Alliance Portfolio Management - Innovation and Marketing in the Pharmaceutical Industry - page 152

Fig. 5.1 Key dimensions
of alliance portfolio
management

et al.'s ( 2004a ) fi nding that the profi tability of technological diversity can be
decomposed into a positive effect via radical product innovation and a direct nega-
tive direct effect that is likely caused by high investment costs. Also, technological
diversity can drive dynamic adaptation as technological diversity increases the
fi rm's ability to identify and select new external opportunities, a fi nding often
ascribed to the fi rm's increased absorptive capacity (Cohen and Levinthal 1990 ).
When discussing Challenge 2 below, I will elaborate on new advances in the absorp-
tive capacity literature (e.g., King and Lakhani 2011 ; Lewin et al. 2011 ) that are
helpful in this regard.
Having laid out different dimensions of alliance portfolio management, I now nar-
row down the focus in this chapter to the key role of diversity in portfolio strategy.
Below, I will fi rst discuss several facets of diversity and motivate my focus on technol-
ogy diversity. Then, I will discuss three new challenges that we face today as we try to
grasp the true effects of technology diversity in the pharmaceutical industry.

5.3 The Diverse Facets of Diversity

Diversity is a concept that has received much attention in the strategy literature. The
multifaceted nature of diversity, however, has been insuffi ciently acknowledged.
Different studies have examined different forms of diversity, including technology
diversity, partner diversity, industry diversity, and product market diversity. Arriving
at generalizations about diversity is diffi cult if these differences in conceptualiza-
tions and operationalizations are not accounted for. In particular, I focus on how
technological diversity differs from the two most common alternative diversity con-
structs, namely (1) partner diversity and (2) industry or market diversity.