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In a turbulent business environment, innovation is the most important issue for business success. This paper addresses two main problems. First, we examine the relationship between market orientation and entrepreneurial orientation as key drivers of innovation. Second, it evaluates the impact of innovation on business performance. Market orientation only focuses on two dimensions, namely the dimensions of customers and competitors. Entrepreneurial oriented is defined along dimensions: proactive, aggressive, autonomy, innovative, and risk taking. Innovation is measured in two dimensions, i.e. product innovation and process innovation. While business performance was represented by financial indicators. Data was collected from small food industries in Indonesia and analyzed by structural equation models. This finding provides support for the positive influence of both market orientation and entrepreneurial orientation on innovation. Finally, innovation becomes a positive contributor to business performance. The study has implications that SMEs with market orientation and entrepreneurial orientation should place much emphasis in order to enhance innovativeness and ultimately achieve better performance