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

Abstract
Purpose
This study explores 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 cultures 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