<p>Based on social information processing theory, this study analyzes how team leaders’ transformational leadership impacts team performance in an auto leasing company undergoing digital transformation, with innovative climate as a mediator. We also investigate whether the impact of innovative climate on team performance is moderated by team size. Survey data were obtained from 288 employees at a Thai auto leasing company undergoing digital transformation. To prevent common method bias, team members assessed team leaders’ transformational leadership and innovative climate, while team leaders who supervised the team assessed team performance. Data analysis was conducted using partial least squares structural equation modeling. The analysis confirmed that the positive effect of transformational leadership on team performance is fully mediated by an innovative climate. Moreover, we found that an innovative climate enhances team performance in smaller teams, but this effect is absent in larger teams. This study shows that in a firm moving toward digital transformation, transformational leadership alone may not be sufficient to improve team performance; its impact is mediated by an innovative climate. Furthermore, while previous research suggests that an innovative climate enhances team performance, our findings indicate that this effect is only evident in smaller teams, not larger ones. Finally, this research suggests that to improve team performance during digital transformation, organizations should develop transformational leaders who foster a strong innovative climate, particularly in smaller teams where innovation and human capital are more effectively leveraged.</p>