Abstract: Purpose: This study focused on studying factors that influence innovation among SMEs operating in the Kingdom of Bahrain to come up with a measurement tool that can be used by policymakers to measure innovation in the business sector on a systematic basis. Design/Methodology/Approach: This study followed a deductive approach based on existing theories and research done on innovation. A sample of 316 was collected through survey interviews responding to structured questions, and a quantitative approach was followed to analyze the data using SPSS. Findings: the results of the study found a significant relationship between influencing factors and innovation except for the Funding and Public Support factor which found no correlation with innovation. Other factors, knowledge flow, cooperating partners, entrepreneur's character, investment in innovation, and COVID-19 Impact all had a significant positive relationship with innovation for SMEs operating in the Kingdom of Bahrain. Research Contribution: this research provides a framework for measuring innovation that can be used by official bodies to measure innovation activity taking place in the Kingdom of Bahrain to improve innovation activity in the country. The research can be used by entrepreneurs of SMEs to improve innovative activities taking place inside their firms. This can be used as well by academic researchers to build on and study further factors that influence innovation and enrich the scientific research supporting economic development in the country. Recommendations: Policymakers to adopt a measurement tool to measure innovation in the Kingdom of Bahrain, and entrepreneurs to review these factors and implement strategies to improve innovation activity inside their companies. Academic researchers study further factors that might influence innovation and enrich the scientific background supporting the innovation infrastructure in the country. Keywords: Innovation, Disruptive Innovation, incremental Innovation, Product Innovation, Process Innovation, Organizational Innovation, Marketing Innovation, Object/Subject Innovation, Knowledge Flow, Investment on Innovation, entrepreneur's Character, COVID-19, Cooperating Partner.