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Despite increasing attention to the influence of customer involvement and social media in developing innovation in small- and medium-sized enterprises (SMEs), few studies have specifically investigated how to improve the effectiveness of social media–based customer involvement. Drawing on the knowledge-based view, social network and capability theories, we address this question by arguing that Social Customer Relation Management (CRM) enhances the effect of social media–based customer involvement upon innovation. Two key capabilities further enhance the moderating effect of Social CRM: social media network and customer information processing capabilities. The results from a longitudinal dataset of 317 SMEs indicate that SME customer involvement, enabled by Social CRM, social media network and customer information processing capabilities increases innovation. These findings have important implications for researchers and managers interested in enhancing the efficacy of SME customer involvement using social media. [ABSTRACT FROM AUTHOR]