In the last decades German governments introduced market mechanisms into the education system by enhancing parental choice, abolishing schools’ catchment areas and obliging schools to find, define and serve niches. At the core of schooling markets are choice policies, which give families the freedom of choice between individual schools and thus, create market incentive mechanisms. A basic assumption of school choice policies is that expanded school choice will generate more competition for schools, thereby increasing accountability and eventually school quality. Hence, upholding their school’s competitive capacity has become a continuing concern of school leaders in German speaking countries and thus, competition is expected to have verifiable effects on the leadership behavior of principals. This study examines the associations of competition between schools and the perceived leadership behavior of principals in the federal state of Hamburg, Germany using data from n = 3950 teachers within n = 74 secondary schools. Based upon latent network analysis, local schooling markets were estimated and related through multi-level structural equation models to teacher survey data. Findings suggest that strong competition between secondary schools in the federal state of Hamburg exists and that competition has major impacts on the leadership behavior of principals, even under control for social context.