Aim: The current study determines the individual characteristics and innovation performance in Pakistani SMEs and moderating role of physiological capital. The present study employed organizational behavior theory and Social exchange theory. Methodology: 310 managers from Pakistani SMEs completed an online questionnaire to examine the results. According to the findings of Structural Equation Modeling (SEM), affective commitment influences readiness for change in a positive way. Findings: The results also showed the association between affective commitment, creativity, and trust on impact of readiness for change and the moderating role of psychological capital among Pakistani SMEs. Implications/Novel Contribution: The study's employment of organizational behavior theory and Social exchange theory is another main contribution. To retain workers, managers must implement procedures that foster employee identity, trust, and organizational respect. Furthermore, the present study contributes to the knowledge already available on the innovation simulation platform for Pakistan's SME sector.