Assessing the impact of environmental innovation in the airline industry: An empirical study of emerging market economies

•A typology is proposed and applied to categorize environmental innovations into technology- and process-based initiatives.•Both technology- and process-based environmental innovations positively influence airlines' revenue.•Only process-based environmental innovations have positive impacts on airlines' profit.•Only process-based environmental innovations positively influence the occupancy rate of airlines.•Pursuing both technology- and process-based innovations at the same time may hinder airline firms' financial performance.

The environmental impacts have been a growing concern in the airline industry around the world. However, few results have been derived to assess the impact of environmental innovation in the context of emerging market economies. Using secondary data manually collected from 40 airline companies from the emerging market economies, this study empirically examines the impact of environmental innovations on firms' financial performance and operational efficiency. We classify environmental innovations into technology-based and process-based innovations. We find that both technology- and process-based environmental innovations positively influence airlines' revenue, but only process-based environmental innovations have positive impacts on airlines' profit. In addition, our results support a negative interaction relationship between technology- and process-based environmental innovations on airlines' financial performance. In relation to operational efficiency, we find that only process-based environmental innovations exert a positive impact on the occupancy rate of airlines. As what is likely the first study addressing this issue in emerging economies, this paper fills an academic void by raising the issue and providing a grounded analysis. The results of this study have broad implications for both researchers and practitioners.