The purpose of this study was to investigate the influence of transformational leadership on technological innovation at the organizational level. Specifically, it was proposed that transformational leadership would have a positive effect on organizational innovation. Furthermore, this effect was proposed to be moderated by an innovation-supporting climate and support received from external organizations. These relationships were tested on 163 R&D personnel and managers of 43 micro- and small-sized Turkish entrepreneurial software development companies. The results confirmed the positive impact of transformational leadership on organizational innovation, which was measured with a market-oriented criterion developed specifically for developing countries and newly developing industries. Furthermore, the relationship between transformational leadership and organizational innovation was stronger when external support was at high levels than when there was no external support. The moderating effect of an innovation-supporting climate was not significant. Managerial implications as well as policy recommendations are provided, for micro and small-sized enterprises in particular. (c) 2006 PICMET.