Governing the Portfolio Management Process for Product Innovation—A Quantitative Analysis on the Relationship Between Portfolio Management Governance, Portfolio Innovativeness, and Firm Performance

Abstract

Past strategy and innovation research has basically ignored potential effects of portfolio management governance issues on portfolio innovativeness, and thereby on innovation management results such as firm performance. Building on the dynamic capabilities view, we hypothesize that portfolio management governance enhances firm performance by enabling higher levels of portfolio innovativeness through market and technological aspects. Our findings support the relevance of considering portfolio management governance to explain higher innovation outcomes. In particular, we can show that formality and explicitness, information support, as well as partial review frequency have a strong impact on the innovativeness of the firm's product portfolio. Consequently, higher technological and market innovativeness drives firm performance. We derive implications for both managers and researchers.

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