In today’s knowledge-driven economy, financial and capital assets no longer play the leading roles. Innovations are the main drivers of competitiveness and development of enterprises, as well as of the countries and societies as a whole. Only those who are capable and flexible enough to adapt to the given circumstances and continuously search for new solutions can survive at such dynamic world market. For that reason, investment in science, creation of new knowledge, research and development (R&D), and new technologies are crucial for the prosperity of the national economy. On the international market, with intense competition and sophisticated consumers, innovativeness becomes an imperative. The main goal of this paper is to explain the significance of knowledge and innovations in today’s business and to identify the main challenges that small and medium enterprises in Serbia are faced with in increasing their innovativeness and ways of overcoming them in order to improve their competitiveness at the international market. The emphasis will be on considering the impact of investment in R&D on strengthening the position of domestic companies in the world market and on the indicators that represent the main weaknesses in domestic innovativeness. Economic and Financial Challenges for Balkan and Eastern European Countries, in Proceedings on the Economies of the Balkan and Eastern European Countries in the Changing World (EBEEC) in Warsaw, Poland 2018, Springer Proceedings in Business and Economics, edited by Marietta Janowicz-Lomott, Krzysztof Lyskawa, Persefoni Polychronidou, Anastasios . Jovanović, Milica Đokić, Milica Innovativeness of Serbian Enterprises as a Factor of Competitiveness Improvement at the International Market info:eu-repo/semantics/article application/pdf 115865 bytes eng 2020 https://phaidrani.ni.ac.rs/o:2412 doi:10.1007/978-3-030-39927-6_7 http://creativecommons.org/licenses/by-nc-nd/4.0/legalcode