Among the key factors that have been found to lead to competitive advantage, innovation is one of these factors. Being, in turn, the leadership style identified as one of the more important to affect organizational innovation, with other contextual variables which also could help to enhance innovation, such as empowerment and climate for innovation. Based on literature review, this study proposed four hypotheses about those variables and attempt to present a complete picture on the relationship between transformational leadership behaviors, perceived innovation and the final relationship with business performance. A quantitative approach was used. Two hundred ninety two online questionnaires were received from a private Nicaraguan company. The findings indicate that transformational leadership behaviors do have a positive and highly significant relationship with perceived empowerment and perceived climate for innovation, which in turn climate for innovation does have a positive and highly significant relationship with innovation. Innovation also has a positive and significant relationship with business performance. Since this is a survey of selected company results may not be generalized to all private Nicaraguan companies. Using a modified transformational leadership model this thesis attempted to make private Nicaraguan companies’ aware of the importance of leadership and innovation to business performance.

Among the key factors that have been found to lead to competitive advantage, innovation is one of these factors. Being, in turn, the leadership style identified as one of the more important to affect organizational innovation, with other contextual variables which also could help to enhance innovation, such as empowerment and climate for innovation. Based on literature review, this study proposed four hypotheses about those variables and attempt to present a complete picture on the relationship between transformational leadership behaviors, perceived innovation and the final relationship with business performance. A quantitative approach was used. Two hundred ninety two online questionnaires were received from a private Nicaraguan company. The findings indicate that transformational leadership behaviors do have a positive and highly significant relationship with perceived empowerment and perceived climate for innovation, which in turn climate for innovation does have a positive and highly significant relationship with innovation. Innovation also has a positive and significant relationship with business performance. Since this is a survey of selected company results may not be generalized to all private Nicaraguan companies. Using a modified transformational leadership model this thesis attempted to make private Nicaraguan companies’ aware of the importance of leadership and innovation to business performance.

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