In the highly volatile and uncertain VUCA environment, the " maintaining stability and promoting innovation" effect of government procurement for small and medium-sized enterprises (SMEs) has become increasingly apparent. A sample of enterprises listed on the New Third Board from 2017 to 2022 is utilized. The mechanism of government procurement on SMEs' innovation is explored from the perspective of internal and external cooperation networks. The results finds that the more government procurement orders SMEs receive, the higher their innovation level. The mechanism test indicates that government procurement incentivizes SMEs to innovate mainly by stabilizing the firm's external supply chain trading relationships and by stabilizing the firm's internal development expectations. In addition, government procurement has a stronger innovation incentive effect on high-tech SMEs, SMEs with high industry competitiveness, and private SMEs; and government innovative procurement has a more significant innovation incentive effect on SMEs than conventional procurement. New evidence confirms that government procurement contributes to stability maintenance and innovation promotion, while offering theoretical support for policies designed to mitigate SME development instability.