Small and Medium Family Owned Enterprises (SMFEs) are the engines of economic development through job creation and poverty reduction in most developing countries. Majority of the multinational corporations started as family owned enterprises. Currently, the Small and Medium family owned enterprises (SMFEs) sector in Kenya contributes over 70% of the country’s GDP. This is in spite of the many issues surrounding this vital sector which include low performance compared with non family enterprises, high mortality rate especially after the founder exits, lack of finances among others. The study sought to establish the relationship between innovativeness and small and medium family owned enterprises performance in Kenya. Resource Based Theory and Schumpeter’s theory of innovation were the theoretical framework for this study. Descriptive and exploratory research designs were adopted. The study population was the manufacturing small and medium family owned enterprises registered by Kenya Association of Manufacturers based in Nairobi City County. The respondents were the Founders, C.E.Os, Directors and Managers of the firms. Data was collected using a questionnaire and the quantitative data was analysed by calculating the response rate with descriptive statistics such as mean, median, statistical deviation and proportion using Statistical Packages for Social Scientists (SPSS) version 21 and Microsoft Excel. Inferential data analysis was carried out by the use of factor analysis and correlation analysis to determine the strength and the direction of the relationship between the dependent and the independent variables. Regression models were fitted in and hypothesis testing was carried out using multiple regression analysis and standard F tests and t-tests. The qualitative data was analysed using content analysis. Microsoft Excel was used to analyse the frequencies of the emerging themes. Data was presented in form of graphs, tables and pie chart among others.