Applying Financial Portfolio Theory to Product Portfolio Decisions: An Empirical Study

Abstract

To date no formal studies of applying financial portfolio theory to product portfolio decisions have appeared in the literature. This article describes an empirical study to explore the feasibility of using concepts from financial portfolio theory to analyze and provide direction for managing product portfolios. Results indicate that financial portfolio theory has promise as an analytical and planning tool for product portfolio decisions, and suggest how action recommendations based on financial portfolio theory may be modified for product portfolio decisions. This approach also provides a framework for identifying and investigating new questions about effective management of organizational resources.