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The purpose of this paper is to investigate the forces driving organizational innovation, particularly CEO transformational leadership as it affects external and internal social capital in top management teams.

Survey questionnaires were administered to 90 Chinese top management teams. Structural equation modeling was used to test the hypothesized relationships.

Both internal and external social capital mediated the relationship between transformational leadership and organizational innovation.

Organizations should strengthen internal and external capital of top management teams to reap maximal innovation outcomes from transformational leadership.

The findings contribute to the transformational leadership, social capital, and innovation literature first by showing how leadership influences innovation through largely neglected mechanisms – internal and external social capital. Second, a social capital focus challenges the tacit assumption that transformational leadership has only internal influences by showing that it potentially spills over to the external domain.

In the world of public school education everything depends on good leadership. Sadly, many of our schools administrators can't differentiate the difference between leading and managing; far too many of them don't know the first thing about fundamental leadership principles. In short, they don't understand the fundamentals of Mission Oriented Leadership, the need for top-down leadership, or the critical differences between leadership and management. A cursory review of the selection process for school administrators, and the graduate level curriculums for those who seek a degree in school administration, clearly supports the contention that policymakers and educators are under the misconception that anyone can be taught or trained to be an effective school leader. Nothing could be further from the truth.