The study investigated various aspects of market orientation and innovation performed by small-sized businesses in small towns of the U.S. The objectives for the study were: (1) to examine market orientation constructs in the small-sized organization, (2) to examine market orientation in relation to business innovation and business performance, and (3) to examine business innovation in relation to business performance.;A sub-sample of small businesses for the study was drawn from the larger national random sample. Small businesses located in communities of less than 20,000, counties adjacent and non-adjacent to non-metropolitan area were chosen for the study. The sample population of the study was small businesses operating with less than 20 employees and with annual sales of $1 million or less.;Simple and multiple regression analyses were performed to examine relationships among the variables under study. The simple regression analysis suggested a significant and positive relationship between small business owners/managers' competitor and customer market orientation and their performance in terms of gross profit (before taxes) and perceived overall business success. The results also indicated that there was a positive and significant relationship between both small business owners/managers' competitor and customer market orientation and innovation. A positive and significant relationship between the small town business owners/managers' degree of innovativeness and their business performance in terms of gross profit and their perceived overall business success was also found.;The results of the multiple regression analyses indicated that among the three variables, business innovation, competitor market orientation, and customer market orientation, business innovation significantly influenced the small town business firms' gross profit, while customer market orientation and competitor market orientation did not significantly affect small town businesses' gross profit with innovation in the equation. Customer market orientation had the most significant influence on small business owners/managers' perceived overall business success among the three variables.;Along with market orientation, innovation was found to be an important factor in business performance in small town businesses. The adoption of market orientation led innovation for small town businesses. When small town businesses are more market oriented, they are also more innovative and show strong business performance.