Purpose: The purpose of this paper is to examine how the nature of management and leadership is related to the management and development of teaching and R&D (research and development) in higher education institutions. Design/methodology/approach: The nature of management and leadership is approached by consideration of transformational and transactional leadership styles. The emergence and influence of these two styles in management of teaching and R&D are examined using an electronic questionnaire for senior and middle level managers at Finnish polytechnics. Findings: Both transactional and transformational environments were identified in polytechnics. Senior and middle level managers did not have the same management and development preferences and their perceptions of the operational and management practices differed. Differences found between the viewpoints of these managers diminished when middle managers perceive transformational environment. In a transactional environment teaching was preferred rather than R&D the role of personnel and students was less important and the good management practices were less common. In a transformational environment, R&D and integrating teaching and R&D had better circumstances to develop further. Research limitations/implications: This study is not concerned with how various environmental and contextual factors affect management of teaching and R&D. Nor did this study shed light on the perspectives of teachers on institutional leadership and management. Practical implications: Development of operations, management and leadership is crucial to integrate and be in transformational interaction involving actors from all levels of a higher education institution. In order to implement changes and improve current practices, managers and leaders should extend the ways they approach and perceive teaching and R&D, their own management and leadership and environment. Personnel training and delegation are both needed. Originality/value: The paper reports on the findings of an electronic survey distributed to senior and middle managers working in polytechnics in Finland that explores their perceptions of teaching and R&D. This paper provides a topical picture of the operative management of teaching and R&D and its extensive meaning in higher education institutions. In addition, this paper identifies a need to examine practice in Finnish polytechnics in terms of the notion of transformational leadership. (Contains 1 figure, 3 tables, and 1 note.)