The goal of this study is to measure the innovation capability of SMEs(Small and Medium-sized Enterprises), compare it with that of other developed and developing countries, and propose the policy to support the developmental plan for SMEs in South Korea. It is essential to perform an in-depth analysis of TFP(Total Factor Productivity) by decomposing it into productivity growth, technical progress, and efficiency change. The result is as follows: First, TFP and technical progress of South Korea present the higher growth rate than that of the developed countries and lower than that of China; Second, technical progress shows the most substantial impact on the growth of TFP in every country we have analysed; Third, it is observed that the gap of technical progress between the average and frontier firms has been recently widened; Lastly, the rate of TFP change is also influenced by the firm size and efficiency allocation. Government policy to enhance the technical competitiveness of Korean SMEs could be suggested as follows: First, an active participation in technical cooperation is required between large companies who have equipped the strong technical competence and small companies who lack of it; Second, government`s financial support for SMEs should be more inclusive and sufficient to the larger number of small enterprises; Third, distinctive rates of productivity growth among industries should be well aligned; Last, it is advised that SMEs` expenditure of the government fund should be thoroughly monitored to make sure that it is allocated only to R&D activities.