Designated peripheral regions within the European Union (EU) have economies and standards of living which are below average. One of the primary reasons recognised by local government for this poor economic standing has been low levels of innovation within indigenous small to medium‐sized enterprises (SMEs). These SMEs have difficulties in growing and exporting or being part of successful supply chains. The aim of this paper is to explore how innovation is successfully incorporated or hindered in SMEs within an EU peripheral region. An innovation model was applied in a multiple case study methodology involving 41 SMEs. Both quantitative and qualitative data were gathered and analysed. The paper concludes that SMEs must strategically plan for innovation and move beyond continuous improvement, or “kaizen”, and states that such plans must avoid quick fixes and address the underlying cultural barriers to innovation, such as organisational structure, owner‐manager leadership issues, a lack of empowerment and lack of use of employees' ideas and suggestions for innovation.