The objectives of the study were to investigate 1) whether paternalistic leadership affects exploitative and exploratory innovation, and 2) whether intrinsic motivation and environmental dynamism moderate the direct effects of paternalistic leadership on exploitative and exploratory innovation. The study was conducted in Sri Lanka by taking a sample of respondents from the information technology sector. The results indicate a notable distinction between the factors driving exploitative and exploratory innovation. Both types of innovations are significantly affected by paternalistic leadership. However, it has a positive influence on exploitation while it has a negative influence on exploration. Intrinsic motivation significantly predicts only the exploratory innovation while environmental dynamism significantly predicts only the exploitative innovation. This divergence can be explained by the inherent differences in the nature of these two types of innovation. Overall, this research advances theoretical understanding and provides practical guidance.