In today's dynamic environment, proper strategies are not enough for companies and they should also be able to work in harmony with their environment. Innovation is one of the factors that allow companies to achieve sustainable competitive advantage through appropriate leadership style and knowledge absorptive capacity. The purpose of this study was to investigate the intermediary role of knowledge absorptive capacity between transactional leadership style and innovation. The population of the study included medium and large-scale manufacturing companies in the industrial estates of Mashhad County. The data were collected by means of a questionnaire. Structural equation modeling and partial least squares were used for data analysis. The results of the analyzing the questionnaires distributed among the sample population - 82 senior managers of companies - showed that there was a significant and positive relationship between transactional leadership and knowledge absorptive capacity as well as knowledge absorptive capacity and organizational innovation. Therefore, the significance of the intermediary role of knowledge absorptive capacity was confirmed.

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