This research examines the influence of product service innovation on the success of small and medium-sized enterprises (SMEs) in Ogun State, Nigeria. The study addresses a significant gap in the Nigerian environment by utilising the Resource-Based View and Innovation Diffusion Theory to examine the impact of innovation on SME performance. A descriptive research methodology was employed, sampling SMEs from the three senatorial districts of Ogun State: Central, East, and West. The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) indicates that Ogun State is home to 31,133 SMEs, accounting for 4.6% of Nigeria's total SMEs. A sample of 1,400 SMEs was selected according to Krejcie and Morgan’s sample size selection method. A pilot study involving 140 SMEs in Ibadan produced a reliability coefficient of 0.8, validating the robustness of the research instrument. The findings indicate a robust positive correlation between product service innovation and the performance of SMEs, with the following key indicators: Model 3 of the hierarchical regression produced a R value of 0.970 and an Rsquared of 0.941, signifying that 94.1% of the variance in SME performance can be attributed to innovation strategies, capabilities, and types. Innovation strategies exerted the greatest significant impact (B = 2.617, Beta = 0.831, t = 68.510, p < 0.001), succeeded by innovation capabilities (B = 0.403, Beta = 0.164, t = 13.126, p < 0.001) and innovation type (B = 0.197, Beta = 0.092, t = 12.282, p < 0.001). Small and medium-sized enterprises who implemented effective innovation strategies experienced notable enhancements in their performance indicators. In summary, a cohesive strategy for innovation markedly improves the performance and competitiveness of SMEs in Ogun State. The report advises SMEs to prioritise extensive innovation strategies and consistently enhance their innovation capabilities to maintain growth and market relevance.