Diversity’s contingent effects on innovation and opportunity recognition: The role of self-efficacy

We apply a collaboration portfolio perspective to the context of small ventures and theorize a nonlinear effect of collaborative portfolio diversity on two distinct performance outcomes: venture innovative performance and venture opportunity recognition. As not all ventures benefit equally from their collaborative activities, however, we continue by exploring the moderating effect of entrepreneurial self-efficacy on these two relationships, posing that entrepreneurs with greater self-efficacy have both higher optimal levels of collaborative portfolio diversity as well as a less negative curvilinear effect. Results from a large-scale survey among ventures in the Dutch creative industries show that entrepreneurs with low levels of self-efficacy exhibit a strong inverted U-shaped effect of collaborative portfolio diversity on opportunity recognition, while a strictly positive effect is found for entrepreneurs with higher self-efficacy, in line with our theorized effects. Our findings imply that too much diversity can be harmful for those entrepreneurs with less faith in their entrepreneurial capabilities, whereas those with higher levels of entrepreneurial self-efficacy are able to reap the full benefits of diversity.