The sustainability-diversification dilemma

Abstract

Diversification poses a strategic management dilemma. Paths to sustainability require firms to develop new products and technologies and to adjust their networks of suppliers and customers; sustainability requires diversification. To become fully sustainable, firms need to diversify in ways unrelated to their core knowledge of technology and markets. Financial markets tend to discount shares of firms that diversify. The current literature does not distinguish sustainability related diversification (SRD) from other motives for diversification. This paper, after reviewing the related literature, proposes some testable propositions that could lead to the development of a mid-range theory of sustainability-related diversification.