The research considers a recently developed model of managerial capability for innovation in the microfirm context. Microfirms are firms employing less than 10 people. The research takes an interpretivist methodological approach based on a pilot study of five in-depth interviews with owner/managers of tourism microfirms. Findings indicate the incremental nature of innovation; the importance of aspects of managerial capability in the guise of leadership, operational capability, strategic thinking and the development of relationships with people. Innovation is shown to emerge through the interaction of aspects of managerial capability and key resource pools. The empirical research results in a refined model of managerial capability for innovation in context. A contribution to microfirm management practice is made through providing a model of managerial capability which can be used to improve the competitiveness of microfirms in the tourism industry. Allied to this contribution it is suggested that policy makers can use the model through further dissemination of their efforts to develop industry best practice. Recommendations for future empirical research based on an expanded microfirm study are suggested.