The ability to innovate and exploit new technologies and processes is critical for economic diversification, sustainable development, and long-term success. As a result, this study aims to outline the Mediterranean countries' performance in the national innovation system and the major barriers and impediments to innovation. In addition, the paper studies how innovation affects employment rates using the FGLS model. The study concluded that innovation is labor-friendly in the Mediterranean region. Moreover, capital accumulation, economic growth, and labor force participation rates tend to have a positive impact on employment rates. The study also deduced that Mediterranean countries show moderate performance in the global innovation index with special drawbacks in the market sophistication, business sophistication, and institution pillars. In addition, they suffer from low employment rates. Thus, policymakers must address structural barriers to strengthening the business and regulatory environments and financial sector and modernize them to raise the private sector's potential for job creation.