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The purpose of this study is to discuss performance measurement that moderates the relationship between innovation capability and business performance. This research was conducted through a survey, by distributing questionnaires to the owners or managers of Small to Medium Enterprises (SMEs) of written batik located in East Java. The subjects of this study are the owners or managers of SMEs. Data analysis using Structural Equation Modeling (SEM) to test the effect of strengthening or weakening performance measurements on the relationship of innovation capabilities and business performance. Data collection techniques by distributing questionnaires, and obtained a number of 84 respondents who are willing to give answers to the questionnaire given. The results of the study, showed that there is a significant relationship between innovation capabilities with business performance, and performance measurement can be used as a tool to improve business performance of SMEs. Practical SMEs implications in this study, to improve business performance, practitioners should pay more attention to performance measurement to strengthen the capabilities of innovation, and pay attention to various other aspects.