We analyze the suitability of cross-sector partnerships as an effective mechanism for private environmental governance. By focusing on the interaction between firms within cross-sector partnerships, we analyze how competition between firms affects partnership effectiveness. Marrying insights from the private governance literature with institutional theory and the resource-based view, we identify under which conditions firm-level competition for legitimacy and capabilities, respectively, undermines or enhances effectiveness of cross-sector partnerships to address environmental issues. In doing so, our argument develops the various factors that moderate the relationship between competition and effectiveness for different types of partnerships. We contend that the effectiveness of cross-sector partnerships for governing global environmental issues depends considerably on whether competitive forces at the firm level are aligned with the collective benefits of partnerships. We discuss the consequences for designing effective cross-sector partnerships as well as the implications of a firm perspective on private governance.