This paper has discussed the association between innovation strategy and competitive advantage among small and medium-sized businesses in Port Harcourt, Nigeria. The survey method used was cross-sectional and used to collect data on 347 SME owners and senior managers out of a population of 2,468 registered businesses (response rate: 86.3%). The four pillars of the innovation strategy were product, process, marketing and organisational innovation. Descriptive statistics and the Spearman rank-order correlation coefficient were used to evaluate the data at the 0.05 level. The findings revealed that the competitive advantage was rated high (M = 3.68), and the incubation of product innovation (M = 3.74), marketing innovation (M = 3.61), and process innovation (M = 3.52) were rated high. The four dimensions of innovation were all statistically significant and positively correlated to the competitive advantage and product innovation, with the highest (rs = 0.712, p < 0.001). A conclusion is made that SMEs that practice innovation strategically on multi-dimensional levels would be better placed to achieve and sustain a competitive advantage. The paper advises that owners and managers of the SMEs ought to prioritise innovation of products and processes, invest more strategically in organisational innovation, and continue to use marketing innovation to enhance customer interaction and positioning in the market.

 Keywords:  Innovation strategy, competitive advantage, small and medium-sized enterprises, product innovation, process innovation, marketing innovation, organisational innovation, SMEs, Port Harcourt, Resource-Based View.