Technological Drivers of Innovation and Performance in Small Businesses Paul Drnevich, The University of Alabama Lou Marino, The University of Alabama Michael Withers, Arizona State University ABSTRACT Innovation can be an important source of competitive advantage, particularly for young or small, resource constrained businesses where technology can enhance existing capabilities and enable new ones. In this study we theorize and examine endogenous and exogenous technological drivers of innovation activity with a sample of 753 in small and medium enterprises (SMEs). Our results suggest that technology that is unique, advanced, and/or used in new ways may be important drivers of innovation activity in small businesses. Further, we find that such technologically driven innovation activity is positively associated with competitive advantage. However, contrary to expectations, we also find that the level of technological dynamism in the industry does not appear to affect innovation activity or performance. These results suggest that technology appears to contribute to a firm’s ability to innovate and its subsequent performance. Hence, an implication for practice would be for firms to invest in such technology-based capabilities to increase their innovation activities and improve relative firm performance. A further, contribution of this study is to identify technology factors associated with innovation activity in the SME context, which contributes to the entrepreneurship and innovation literatures. Citation: Drnevich, P., Marino, L., & Withers, M. (2011). Technological Drivers of Innovation and Performance in Small Businesses. Babson College Entrepreneurship Research Conference, Syracuse, NY.