With rapid changes in the business environment, more acute competition and increasingly demanding clients, organisations in the construction industry have identified innovation as a means of achieving competitive advantage. Innovation provides an important avenue for firms to improve performance while differentiating their products and services. Research has identified a number of factors as influencing innovation in construction organisations. Primarily these include internal factors such as organisational climate, innovation championing, leadership and exogenous influences such as clients, regulations, technology and the economy. The role of senior management in promoting innovation is widely recognised in literature. However, in the construction and project based environment, very few studies have focused on middle management and how their day to day leadership activities impact on innovation and project performance. The purpose of this study was to improve middle management leadership behaviour in order to facilitate innovation and improve project performance in construction professional services firms. Through a combination of qualitative case study, questionnaire surveys and qualitative interviews, the research identified how the leadership behaviour exhibited by middle managers in the work place could enhance innovation and project performance. The study was undertaken in five phases to reflect the five key objectives for the research. The first phase comprised a review of the literature on innovation to identify key internal and external factors influencing innovation and ultimately, project performance. The second phase involved a case study of three different innovative projects to examine the role of middle managers in facilitating the innovations studied. Phase three of the study investigated the relationships among transformational leadership, innovation championing and organisational climate for innovation while examining how they combine to promote innovation and enhance project performance. Phase four involved qualitative validation of the relationship among the constructs examined in phase three and preparation of leadership development resource for middle managers which was subsequently trialed in phase five. Key findings from the study suggest that transformational leadership behaviour exhibited by middle managers influences innovation by developing an environment conducive to innovation which in turn fosters innovation championing behaviour and ultimately, enhances project performance. The study contributes to knowledge and adds to the understanding of the role of middle managers in facilitating innovation and improving project performance. It demonstrates that the bypass effect of transformational leadership is applicable in the project based environment since transformational leadership of middle managers directly influenced project performance, circumventing project managers. In addition, the cascading effect of transformational leadership was confirmed, as championing behaviour and climate for innovation mediated the relationship between transformational leadership of middle managers and project performance. Furthermore, it revealed that the individual dimensions of transformational leadership influenced innovation and project performance differently. The study found that individualised support was the most influential dimension impacting on innovation championing behaviour, climate for innovation and project performance. Articulating vision and fostering the acceptance of group goals both influenced climate for innovation and project performance. High performance expectation, modelling behaviour and intellectual stimulation influenced innovation championing and project performance. Beyond these the study has highlighted the particular actions which constituted each dimension of transformational leadership and how they influenced the performance of project team members. Through this study transformational leadership development resource has been developed to help middle managers cultivate the expected leadership behaviour that could facilitate innovation and improve project performance. The study also identified how transformational leadership behaviour can be engrained in the day to day working practices of middle managers. The study presents a more positive view of middle managerial role in improving organisational performance contrary to previous negative reporting on this constituency and identifies the need for greater recognition for their role. The study recommends that construction professional services firms should support middle managers to develop transformational leadership behaviour and create the kind of environment where innovation becomes a part of the normal daily work practices. In addition the study opens a new avenue for the study of transformational leadership by using both qualitative and quantitative methods to investigate the impact of the individual dimensions. It recommends that future research adopts the same approach in different contexts to further test the suggested relationships. The study concludes with recommendations for policy makers to give greater attention to incorporating transformational leadership behaviour into the essential set of behavioural competencies managers in the construction industry need to develop beyond their technical skills.