Drawing on the strategic management, innovation, tourism, marketing and organisational behaviour literatures over the past 50 years, we propose a resource-based (Barney, 1991) and dynamic capability (Wernerfelt, 1984; Teece et al., 1997; Eisenhardt and Martin, 2000) research approach to theoretically explore how small tourism firms can manage and reconfigure their existing pool of resources through their innovative capabilities to deal with the turbulent environment in which they are embedded. This paper conceptually examines and schematically models the impact of the dynamic capability of firm-level innovativeness on sustainable competitive advantage.