Business Group Affiliation and Environmental Innovation: The Moderating Role of Board Diversity

This study examines the relationship between business group (BG) affiliation and corporate environmental innovation, with a particular focus on the moderating role of board diversity. Drawing on resource dependence theory (RDT) and agency theory, we argue that although BGs provide affiliated firms with strategic resources, their governance structures may constrain the deployment of these resources for environmental innovation. Using 38,395 firm‐year observations from Chinese A‐share listed firms between 2009 and 2023, we find that BG affiliation is negatively associated with environmental innovation, suggesting that governance constraints may outweigh the resource advantages associated with BGs. We further find that board diversity significantly weakens this negative relationship, consistent with its proposed role in strengthening governance and facilitating strategic resource deployment. These findings advance understanding of the role of organisational structures and internal governance in corporate environmental innovation, offering practical insights for managers and policymakers seeking to promote environmental innovation in emerging economies.