Small firms have earned growing recognition due to its contribution to national economies. The way small firms matter has evolved over a period of time. The paradigm shift has been seen from the view point of small firms as a contribution to society and political stability to more on economic ground. The development and success of small firms may help smooth transition of economies however the mortality rate of such firms are quite high, they are variety of reasons for failures including undercapitalization to inability of owners to manage the firm when it’s in growing stage. We strongly believe development of innovative capacity may prevent small firms from failing and contribute to sustainability and success. Based on this motivation we attempted to indentify and test some building factors of innovativeness and how these contribute to performance in small firms. In our study we attempt to validate empirically the impact of three predictors i.e. Social Network, Entrepreneurial Climate and Learning Orientation on innovativeness and then the impact of innovativeness on small firm’s performance. Our study reveals that out of these three predictors of innovativeness entrepreneurial climate and learning orientation positively contribute to innovativeness and subsequently innovativeness has positive impact on firm performance. Based on these findings we conclude that learning orientation and entrepreneurial climate can increase the small firms’ capacity to innovate, which can increase firm performance. These findings are useful for small firms’ owner as well as for policy makers in formulation of policy which may promote learning among small firms owner.