Product portfolio decision-making and absorptive capacity: A simulation study

The central decision any firm must make is determining which markets to serve with what products. This core managerial decision-making involves balancing between exploration and exploitation of new technology-market knowledge. We construct a history-friendly empirically grounded system dynamics simulation setting that explores the dynamics of managing firm's product portfolio. Our simulation findings illustrate how managerial decision-making regarding the absorptive capacity may influence the evolution of the product portfolio. The results pave the way for multiple fruitful research avenues for future studies.