Small and medium-sized enterprises play a crucial role in Ecuador’s economy, but they face structural challenges that compromise their long-term sustainability. Although business innovation is recognized as a key factor in enhancing organizational performance, empirical evidence linking these two variables in the Ecuadorian context remains scarce. This study aims to analyze the relationship between innovation capability and organizational performance in firms affiliated with the Chamber of Small and Medium Enterprises of Pichincha. A survey was conducted with 215 managers and founders, assessing two dimensions: innovation capacity in products and processes from a functional perspective, and performance based on Quinn and Rohrbaugh’s Competing Values Framework. The data was analyzed using nonlinear principal component analysis to construct standardized indices, followed by Spearman correlation tests and cluster analysis through the Two-Step Cluster method. The findings reveal a positive relationship between process innovation and both financial and operational performance. Product innovation also demonstrates a positive, though weaker, effect due to the influence of external factors. Furthermore, distinct business profiles were identified based on their levels of innovation. The study suggests that strengthening innovation, particularly process innovation, could significantly contribute to improving the performance of small and medium-sized enterprises operating in strategic sectors. However, it is recommended that future research employ explanatory models to analyze the underlying causal mechanisms and empirically validate these associations.