Over the years, business and management concepts often change, evolve and replace each other. Over the last few years, innovation has been gaining more and more attention as a key factor for organizational growth and competition. More and more managers are opting for contemporary leadership styles to ensure an innovative climate within their company that would also motivate employees to reach their full potential and contribute to organizational efficiency. This thesis deals with the definition and analysis of earlier and contemporary leadership styles, their impact on all organizational elements, including employees and on the overall organizational performance and their correlation with the innovative behavior of managers. The thesis consists of a theoretical and an empirical part. The empirical research was conducted through questionnaire, where in total 66 respondents participated, of which 33 were managers and 33 were directly subordinate to them. The survey determined characteristics of transactional and transformational leadership in managers working in public as well as private sectors and also determined the strength of its correlation with his/ hers innovative behavior. Deviations were also found in the assessment of managers’ innovative behavior by the manager itself and their directly subordinate employee.