The role of alliance portfolio diversity for corporate decarbonization, circular economy and eco-innovation

Abstract Amid growing societal and regulatory pressure to demonstrate environmental responsibility, firms are increasingly engaging in environmental alliances to address complex sustainability challenges. However, the implications of having a diverse portfolio of green alliances for a business’ progress toward environmental goals remains insufficiently understood and long-term empirical evidence on this relationship is still scant. This study adopts a novel resource-based and knowledge-based perspective to examine how environmental alliance portfolio diversity—across technological, industrial, and functional dimensions—shapes corporate environmental performance. Using data from 280 multinational companies and 1,539 environmental alliances spanning 2002–2023, our analysis reveals that all three dimensions of diversity are positively associated with overall corporate environmental performance, emission reductions, more efficient resource use, and green innovation within firms. These findings underscore the strategic importance of alliance portfolio diversity in advancing sustainability, decarbonization, and circularity goals and provide actionable insights for firms seeking to enhance specific non-financial performance metrics.