This study examines the relative performance of small- versus medium-sized service firms with respect to innovation orientations and their effect on business performance. We examine the effect of innovation on business performance between the two groups of firms, exploring differences in innovation orientation on performance between the groups of small- and medium-sized firms. We also examine differences within each group, exploring the extent to which innovation focus differs within each group. The empirical data were drawn from 180 managers in Australian service small and medium enterprises. The findings suggest that while there is no difference between small- and medium-sized firms with respect to their innovation orientations, significant differences exist between the firm s size with respect to the effect of innovation orientations on business performance. Specifically, exploitation innovation has a stronger effect on business performance among small firms compared with medium-sized firms, and exploration innovation shows a stronger effect on business performance among medium-sized firms compared with small firms. Overall, the findings show important relative differences between innovation orientations and business performance across different sized firms.