Globalisation has had a significant impact on the world and changed the landscape of manufacturing. Owing to this, UK manufacturing has to face challenges from both advanced economies, such as France, Germany, Japan and the US, as well as developing economies, such as Brazil, Russia, India and China (BRIC). To respond to this challenge, UK manufacturing needs to differentiate itself by shifting its focus towards high value manufacturing (HVM) as it has strong potential to bring sustainable growth to the UK economy. Technological advancement in the cyberphysical age enables companies to connect and create supply chains (SCs) in ways that were not previously possible. This presents an opportunity for small and medium sized enterprises (SMEs) to participate and increase their participation in larger customers’ SCs. However, this requires SMEs to have the capability to interact effectively with their larger customers. This research explores the relationship between interaction capabilities, SMEs’ participation and firm performance. Interaction capabilities are a relatively new concept in an SC context, with existing studies more focused on the marketing domain. There are four types of interaction capabilities: human, managerial systems, technological and cultural. To examine these relationships, three sequential phases were involved. First, a reliable and valid scale for measuring interaction capabilities was developed. After developing the scale, data were collected by surveying 181 UK HVM SMEs. The survey data, then, were validated by two in-depth case studies. Of the four interaction capabilities, the results suggest SMEs have human interaction capability (HIC) in place as it significantly improves their firm performance. Additionally, acquiring HIC would support the development of other capabilities such as technological interaction capability (TIC) and cultural interaction capability (CIC). This research also indicates that SMEs should consider developing capabilities to support managerial interaction capability (MIC) if they wish to grow their business with larger customers and in turn improve their business performance.