This article aims to improve the competitiveness of small and medium enterprises (SMEs) by advancing human capital development. Both internal and external factors influence the competitiveness of SMEs, according to a systematic literature evaluation of 52 studies from 2000 to 2022. Human capital, which includes the knowledge, skills, and talents of entrepreneurs, managers, and employees, is a crucial strategic asset for SMEs to navigate the competitive landscape. The framework includes strategic HRM practices for talent acquisition, entrepreneurial leadership for innovation, a culture of learning and knowledge management, and the use of networks and social capital. The research enhances understanding of SME competitiveness and provides critical insights for formulating targeted strategies and interventions. Future studies should include empirical studies in various SME situations and an examination of the interaction between internal and external competitiveness factors.