This study aims to explore how corporate culture influences green environmental innovation and assesses its impact on Shariah financial performance within Islamic financial institutions.
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.
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.
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.
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.
