How Capable are Small and Medium Enterprises in Conducting Innovation?

—Several studies have recognized innovation as an essential aspect of improving competitiveness. Prior studies also argued that small-and medium-sized enterprises (SMEs) should increase their innovation and technology to deal with competition. However, just how SMEs are capable of performing innovation still needs to be measured. This study purposes assessing the capability of SMEs to conduct the technological innovation. Technological innovation capability (TIC) is defined as a comprehensive set of characteristics of a company that facilities and supports its technological innovation strategies. The seven TICs in this study consist of learning, R&D, resources allocation, manufacturing, marketing, organization, and strategic planning capabilities. A sample of 62 companies located in Sidoarjo, Indonesia, in particular Wedoro—which is one of the footwear centers in East Java, was purposively selected from footwear SMEs. This study distributed questionnaires to collect the primary data and proceeded to analyze the data using descriptive analysis. The findings demonstrated that the majority of footwear SMEs in Sidoarjo are small businesses. Overall, their TICs are in the medium category, with the highest average strategic planning capability (4.96), with the lowest average being learning capability (1.83). Some solutions are suggested to increase these firms’ TICs.