The year 2010 has been made as the Year of Innovation aims to celebrate and encourage innovation among Malaysians. Innovation is recognized as the next phase of development towards a developed country status. Innovation creates jobs and boost national competitiveness. Innovation is a central issue for organizations in the new global economy. It is a potential mechanism towards competitive advantages and the key to sustainable growth. Small and Medium Enterprises (SMEs) make a valuable economic and social contribution because of their innovative capacities. SMEs are the engine of growth in achieving the developed nation status. Malaysian policy-makers recognized the importance of innovation and SMEs to the competitiveness of national economies. This study is interested in how Malaysian SMEs achieved superior performance by means of innovativeness. This study, therefore, investigate innovativeness as the factor in improving the performance of SMEs in Malaysia. This study answered the following; 1) What is the innovativeness climate of Malaysian SMEs?; 2) To what extent does Malaysian SMEs exhibits innovativeness?; and 3) Is there a relationship between innovativeness and performance of Malaysian SMEs? The results indicate that process innovativeness, product innovativeness and behavioural innovativeness respectively have significanct relationship with organizational performance. Since innovativeness has a positive relationship with organizational performance of SMEs, SMEs need to design and implement cultures that will nurture innovativeness to grasp its benefits. The findings provide an understanding based on the dimensions of innovativeness and can be used to develop targeted programs aimed at enhancing process, product and behavioural innovativeness among Malaysian SMEs.
