Background <p>Innovation depends not only on technological resources but also on leadership that cultivates employee motivation and creativity. Drawing on Self-Determination Theory (SDT), this study examines how servant leadership (SL) promotes innovative work behavior (IWB) through the mediating role of psychological empowerment (PE) and how psychological capital (PC) strengthens this pathway as a personal resource.</p> Methods <p>Survey data were obtained from 200 faculty members across public and private universities in Punjab, Pakistan. Using Partial Least Squares Structural Equation Modeling (PLS-SEM) with bootstrapping, the study tested a moderated-mediation model. Validated scales for SL, PE, PC, and IWB ensured measurement reliability and construct validity.</p> Results <p>The results confirm that servant leadership enhances innovative work behavior directly and indirectly through empowerment, while psychological capital amplifies the servant-leadership–empowerment link, indicating that employees with greater personal resources benefit more from empowering leadership.</p> Conclusions <p>The findings extend SDT by revealing the motivational and boundary mechanisms that connect servant leadership to innovation in higher-education settings. Practically, the study highlights the need for leadership-development and resource-building initiatives that jointly strengthen servant-leadership competencies and psychological capital to foster innovation within knowledge-intensive organizations.</p>