Corporate culture and green environmental innovation: effects on Shariah financial performance

Purpose – This study aims to explore how corporate culture influences green environmental innovation and
assesses its impact on Shariah financial performance within Islamic financial institutions.
Design/methodology/approach – A survey of 270 managers from institutions in Banten, Jakarta and West
Java, Indonesia, was conducted. Data were analyzed using Partial Least Squares Structural Equation Modelling
(PLS-SEM) to test relationships between four culture types – clan, adhocracy, hierarchy and market – green
innovation dimensions (organizational practices, processes and products), and financial performance.
Findings – The results indicate that adhocracy and market culture significantly promote green innovation,
while clan culture has a weaker yet positive effect. Conversely, hierarchy culture negatively affects all
innovation dimensions. Green organizational practices, processes and products positively contribute to
Shariah financial performance, suggesting that flexible and market-oriented cultures help align sustainability
with financial objectives.
Practical implications – From a practical perspective, managers are encouraged to foster innovation-friendly
environments, align market-driven incentives with environmental goals and revise rigid internal structures.
Recommended mechanisms include cross-functional green teams, eco-compliance key performance indicators
and integrating maqashid-al-shariah principles into environmental strategies.
Originality/value – This study advances the Islamic finance and sustainability literature by empirically
connecting culture, innovation and performance, and offers practical strategies for embedding environmental
innovation within Shariah-compliant financial operations.
Keywords Green environmental innovation, Clan, Adhocracy, Hierarchy, Market,
Shariah financial performance