<p>Social media is extensively adopted by micro, small, and medium enterprises (MSMEs) in developing economies such as Pakistan, yet its specific contribution to innovation is not well understood. This study investigates the mediating role of customer engagement behavior in the link between social media usage and innovation opportunities among 45 Pakistani MSMEs. Using partial least squares structural equation modeling (PLS-SEM), results indicate that customer engagement fully mediates this relationship; social media usage does not directly influence innovation but facilitates it through customer interaction. The findings highlight that for MSMEs, the strategic value of social media lies in its deliberate use as a relationship-building tool, with customer engagement playing a central role in innovation.</p>