Abstract
The competitive business environment today is constantly calling firms to innovate for sustainability. This need reforming the way they operate, manage and develop themselves. Nevertheless, flexible firms can easily understand and adapt to the drivers of innovation to reach a higher rate of sustained success. The aim of this study is to identify the role of leadership with its two types: transformational and transactional as an aid to manage innovation and identify effectuation as a moderator to this relationship. Furthermore, the aim of the current study is to find out whether effectuation can enhance the potential moderating role between transformational and transactional leadership with management innovation and thus can be considered a development to the theory of effectuation. The data is collected from 314 complete and usable surveys in the service industry and analysed for CFA correlations and SEM. The results reveal that transformational leadership is positively correlated to transactional leadership, effectuation, and management innovation.
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