This paper examines the determinants of innovation amongst small and medium enterprisesin the Malaysian manufacturing sector using firm-level data. For small-sized firms, youngerfirms are more likely to innovate compared to older firms. However, for medium-sized andlarge-sized firms, older firms are more likely to innovate. The extent of foreign ownership isnot an important determinant of innovation. Small-sized firms with more employees are morelikely to innovate. Medium-sized firms that produce for domestic market tend to be moreinnovative. In terms of ownership structure, medium-sized firms that are public limitedcompanies are less likely to innovate. The relationship between technological characteristicsof industry and firms likelihood to innovate appear to be complex. Higher marketconcentration is associated with higher probability to innovate for medium-sized firms.