How entrepreneurial orientation can leverage innovation project portfolio management

Alexander Kock,Hans Georg Gemünden

doi:10.1111/radm.12423

Abstract

Innovation project portfolio management (IPPM) is a key task in R&D management because this decision‐making process determines which R&D projects should be undertaken and how R&D resources are allocated. Previous research has developed a good understanding of the role of IPPM in R&D strategy implementation and of successful IPPM practices. But the fundamental orientations that drive the strategy formation and implementation process have never been investigated in the context of IPPM, and it is unclear whether successful practices are equally valid for different strategic orientations. This study, therefore, investigates the moderating impact of a firm’s entrepreneurial orientation on the relationship between strategic portfolio management practices and portfolio success. An empirical analysis of 257 firms shows that both innovativeness and risk taking as entrepreneurial orientation’s dimensions positively moderate the relationship between managerial practices and performance. Specifically, we find that firms high in innovativeness profit more from stakeholder engagement compared to firms low in innovativeness. Firms high in risk‐taking profit more from a clearly formulated strategy. With increasing innovativeness and risk‐taking propensity, firms also profit more from business case monitoring and agility in portfolio steering. The results suggest that a firm’s entrepreneurial orientation can leverage the effect of IPPM practices. Vice versa, a lacking entrepreneurial orientation can render these practices ineffective. Strategic orientation and IPPM practices should, therefore, be aligned with each other to enable firms to better implement their strategy and generate competitive advantage.

Highlights

Since portfolio management is a central means of strategy implementation (Meskendahl, 2010; Kopmann et al, 2017; Clegg et al, 2018), we investigate whether and how entrepreneurial orientation (EO) leverages the performance of strategic portfolio management practices
Confirming previous research, we found that management practices along the phases of the portfolio process were related to portfolio success: the coefficients of stakeholder involvement (b = 0.21, P = 0.000), strategic clarity (b = 0.08, P = 0.032), business case monitoring
Innovativeness was positively related to portfolio success (b = 0.20, P = 0.000), while the direct effect of risk taking was not significant

Summary

Introduction

The management of research and development takes place at three different levels: (1) the strategic level, on which managers develop strategic innovation goals and the roadmaps how to reach them (Salomo et al, 2008; Talke et al, 2011); (2) the tactical level of innovation project portfolio management, on which managers determine which R&D projects are undertaken and how resources are allocated to them (Floricel and Ibanescu, 2008; Spieth and Lerch, 2014); and (3) the operational level of single R&D projects, on which innovative development and research tasks are executed (Keller, 2017; Chappin et al, 2019). Alexander Kock and Hans Georg Gemünden level, by analyzing how the effectiveness of portfolio management practices at the tactical level is affected by characteristics of the strategic level. Such an investigation is useful because R&D divisions work on many projects simultaneously, and the selection of the right candidates, the allocation of scarce resources to projects, and the management of interdependencies between projects has become a critical process for the overall innovation success (Spieth and Lerch, 2014; Kock and Gemünden, 2016; Clegg et al, 2018). Since not all practices are likely to be effective in all contexts, many authors call for a contingency perspective to investigate the boundary conditions of successful portfolio management (Floricel and Ibanescu, 2008; Petit, 2012; Martinsuo, 2013; Kock et al, 2016)

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