Innovations and their use in the competitive struggle, both at the level of national economies and at the level of enterprises, are undoubtedly becoming the main driver of development in modern conditions. This goal can only be achieved through a profound technological re-equipment of scientific, technical and productive potential, which requires an intensification of investment activity in the economy. The latter is a necessary condition for ensuring sustainable growth and strengthening the competitive advantages of national economies in global markets through their modernisation and technical reconstruction. That is why, at the present stage, the only way to develop the world economy to meet the global challenges and increase the level of international competitiveness is to create an innovation and investment economy. However, many factors hinder such development in European countries, and certainly in Ukraine. It is particularly difficult to implement innovations in the small and medium-sized business sector. The reasons for this gap include the low interest of the financial sector and large companies in financing small and microenterprises, underdeveloped mechanisms for cross-sectoral capital flows, and weak levers to stimulate the introduction of high-technology, high-cost innovations for small and microenterprises. As a result, innovation does not become a means of enhancing the competitiveness of the economy. The purpose of the article is to summarise theoretical approaches and practical aspects of determining methods and instruments of regulation of economic development of innovations in the sector of small and microbusinesses in Ukraine. The article is also aimed at a comparative analysis of foreign experience of state regulation of modernisation transformations in the economy on an innovative basis and at making proposals for their implementation in Ukraine. This study uses the methodology of interdisciplinary science. The theoretical underpinning is based on the content analysis of research by scholars from different countries, the integration of interdisciplinary knowledge and the integration of heterogeneous characteristics into one system. This has allowed certain results to be formulated, substantiated and conclusions to be drawn. In particular, the comparative analysis of the development of innovation in SMEs, the identification of trends in the development of small and microenterprises in Ukraine under martial law, the determination of the role of innovation in the post-war economic recovery of Ukraine, and the consideration of methods of regulating the implementation of innovation in SMEs in the EU. The global paradigm of the European Union's "new innovation perspective" is that by implementing active policies to promote innovation and new knowledge, EU member states are contributing to the fact that regional policy, which used to be redistributive in nature, is increasingly taking on the features of a structural innovation policy. The synergistic effect is achieved by combining the member states' own national innovation strategies and their participation in supranational, pan-European innovation programmes. At the same time, a feature of recent years is that the EU supranational institutions prefer to assist regions not through direct funding, but by motivating the development of their innovation infrastructure as part of the development of innovation policy. The development of innovative activities should become a tool for strengthening cooperation with other countries and Ukraine's entry into the global innovation community. Participation in international innovation programmes, projects and conferences will facilitate the exchange of experience and technologies between countries, as well as attract foreign investors to Ukraine. Cooperation between the state, business and research institutions will be the basis for creating an innovative ecosystem in Ukraine. Efficient use of national resources and potential, attraction of talented professionals and start-ups, which will contribute to economic development and improve living standards, will ensure the creation of a favourable environment for innovation activities of small and microbusinesses.