Being in the stage of transition by innovation-driven in China, this paper analyze the development obstacles and business performance of SMEs from the view of fixed capital investment, utilization of labour and the growth of profit etc. And then, uses the variable of type and endowment of firms in the production function per capita, and study the contribution of the number of SME and big capital’s firm to per capita gross industrial production by provincial panel data in China, the result shows that the contribution of SMEs of China to total growth amount to 72.6 percent. Since that it is very importance to improve technology innovation ability of SMEs, this paper also analyzed the way of improvement for SMEs’ innovation ability deeply. The way just is: Firstly, with a competitive market environment the effective incentive on entrepreneur can lead to more stronger motivation of innovation; Secondly, SMEs must have one stable R&D team or innovation team, and be able to provide funds to guarantee R&D or innovation, and establish an effective capital accumulation mechanism; Furthermore, the enterprise should pay more attention to internal management, to summarize efficient experience and forming regulation knowledge, in order to guide the technology innovation or R&D of SMEs for a long time.