The purpose of the article was to identify the determinants of innovation introduced in small and mediumsized enterprises and barriers to their development. There were presented results of research carried out at the turn of 2013 and 2014 in the Malopolska province. The introduction of eco-innovation by businesses, gives a chance to gain a competitive advantage in the market. The main reasons for their introduction are: tax relief, care for the environment and a desire to improve the company’s image. The SME sector companies face many barriers to their implementation for example: the market uncertainty, financial constraints and outdated infrastructure.