This article explores the relation between informal human resource management practices and innovation performance in European small and medium-sized enterprises (SMEs). We use the resource-based view and the self-determination theory to develop hypotheses on how informal human resource management practices affect innovation performance. The research was based on data from the European Company Survey 2019. The sample consisted of senior managers in charge of personnel, working in SMEs across 28 European countries. Structural equation modelling showed that informal human resource management practices that satisfy employees’ needs for competence and autonomy positively contributed to innovation performance. Fostering employee needs for relatedness, however, negatively affected innovation performance. The study provides theoretical and practical implications, gives insights for managers and policy makers seeking to foster innovation in SMEs and identifies areas for future research.