While a country expands its industrial base in meeting the challenges of the new millennium, the importance of the small and medium industries will become more significant. This study aims to review the implementation of benchmarking methodology in small and medium enterprises for highlighting their needs and challenges. The findings of the review reveal that although benchmarking allows the SMEs to improve their operational and financial performance, few entrepreneurs turn to benchmarking, due to lack of time and resources. Moreover, it was found that the use of cluster approach among SMEs could be a useful tool for meeting their challenges related to globalization. The paper indicates that innovation implementation principles in large organizations are not directly transferable to SMEs and a specific framework, which suits the SMEs structures, processes, resources and culture is needed.