With globalisation and a rapidly changing environment, the higher education sector in developing countries is facing challenges that require extraordinary leaders. Innovation is important for organisations, particularly in learning environments. Transformational leadership (TL) has been found to have an important influence on innovation, leading to increased goal-directed behaviour on the part of followers, promoting organisational change, and a spirit of trust, and helping followers to exceed their performance expectations. This research aimed to examine the impact of TL on product and process innovation, and the differences between these impacts in public and private higher education institutions (HEIs) in Iraq. Questionnaires and interviews were administered to 439 teaching staff and 10 leaders from private and public HEIs. Employing multi-group structural equation modelling (SEM) with AMOS 20, the research showed that TL plays a pivotal role in enhancing product and process innovation and that the style would be ideal in an Iraqi educational context as it would promote strategies for developing innovation in both sectors. The interviews revealed that there are similarities and differences between public and private HEIs in Iraq regarding the relationship between TL and both product and process innovation. Guidelines are developed for researchers as well as leaders, and evidence is provided in support of the use of TL to increase product and process innovation within higher education in developing countries, particularly Iraq. The implications of the findings and suggestions for future research are discussed.