Untangling the Relationship Between Technology Portfolio Reconfiguration and Firm Performance: Detrimental or Beneficial?

ABSTRACT Using dynamic capabilities theory, this study investigates how the reconfiguration of a firm's technology portfolio influences its performance. Analyzing data from S&P 500‐listed firms (an unbalanced panel of 587 firm‐year observations) in the ICT industry, we identify an inverted U‐shaped relationship between such reconfiguration and performance. We also find that this relationship is moderated by entrepreneurial orientation. Specifically, the positive impact of technology portfolio reconfiguration on firm performance at relatively low levels of reconfiguration and the negative impact at relatively high levels are both more pronounced in firms with high levels of entrepreneurial orientation than in those with low levels. However, we do not find evidence that market dynamism moderates this inverted U‐shaped relationship. These findings form a significant contribution to the body of knowledge on technology portfolio management and organizational change.