The rapid change in markets is one of the monst significant challenges currently facing firms around the world and they need to adapt to these changes in order to improve or maintain their strategic position and to achieve a competitive advantage. The purpose of this study is to examine the influence of innovation on competitive advantage in the context of Saudi Arabian firms, therefore to examine this relationship, a quantitative method was applied by conducting a questionnaire among Saudi Arabian firms. The total sample of this study was 409 respondents that were useable for analysis and the results showed that innovation has a positive and significant influence on competitive advantage. This study contributed to the literature of strategic management and competitive advantage by empirically examining the influence of innovation on competitive advantage. This study is one of only a few studies that investigate this topic in the context of Saudi Arabia. Findings, implications, and recommendations of this study can assist firms to adopt a strategy that focuses on innovation.