In this paper we test whether the use of a set of technology management tools (TM-tools), a specification of alliance portfolio capability, influences the relationship between alliance portfolio diversity and a firm's innovation outcomes. With this model, we add to the theoretical literature on the performance effects of alliance portfolio diversity and specific contingencies allowing to appropriate benefits from this diversity.Based on a sample of South African firms, we first confirm the inverted U-shaped relation between alliance portfolio diversity and a firm's innovation outcomes found by earlier research. We also show that the shape of this inverted-U differs for incremental and radical innovation outcomes. Subsequently, we test the moderating effect of the use of TM-tools on this relationship, for which find a strong positive moderating effect. In particular, for firms intensively using TM-tools, the negative effect of high levels of alliance portfolio diversity on innovation outcomes turns into a positive effect. This suggests that the use of formal technology management practices is beneficial to manage highly diverse alliance portfolios.