This research is the analysis of using structural equation method in order to investigate the cause and effect relationship among the elements related to the innovation activity and the degree of the influence on that, and in order to make sure the sequential processes into the meaningful management performance for improving the efficiency and effectiveness of a various of innovation activities performing in the domestic small and medium enterprise. To perform this research, we surveyed CEOs, managers, workers working for manufacturing business, we distributed 250 sheets totally and withdrew 206 sheets. we analyzed 169 sheets that we could use for this research using SPSS 15.0 and AMOS 18.0 program.