Small and Medium-sized Enterprises (SMEs) play a critical role in the economic growth and innovation of any nation. Despite their importance, SMEs often face significant challenges that hinder their innovation processes, including financial limitations and restricted access to information and technology. Additionally, understanding how open innovation practices can sustain competitive advantages in fast-evolving global markets is essential. This study investigates the innovation capabilities in South African SMEs, focusing on their relative importance in driving innovation, highlighting their multifaceted approach to drive innovation and remain competitive. A survey of 220 South African SMEs evaluated 19 innovation capabilities across 8 dimensions using a 5-point Likert scale. Principal component analysis identified five key factor groupings: risk management, customer acquisition, knowledge management, business networks, and innovation/product enhancement. The findings reveal that SMEs strategically manage risks, leverage customer insights, and cultivate networks to enhance their innovation capabilities, thereby positioning themselves as competitive players. By pinpointing the primary drivers of innovation, this study proposes strategies to strengthen these capabilities in the dynamic global economic landscape.