Jodhpur, Rajasthan—a key hub of India’s wooden handicraft furniture industry—has gained international acclaim for its intricate, culturally rooted designs and craftsmanship. Despite strong export potential, the sector faces significant innovation-related challenges. This paper examines the barriers preventing local producers from modernizing product design, production processes, marketing, and sustainability practices. Drawing on qualitative interviews with 60 stakeholders including artisans, entrepreneurs, cluster managers, and policymakers, alongside field observations and secondary data on exports, we identify key constraints: limited financing, resistance to mechanization, low digital literacy, fragmented institutional support, and lack of sustainability awareness. We also highlight "hidden innovations" practiced informally, such as material repurposing, blend designs, and eco-friendly finishes. Based on findings, we propose a holistic framework of interventions: local design incubators with e-commerce training, cluster-level showrooms, innovation funding, coordinated policy initiatives, youth and women empowerment, and sustainability certifications. By grounding innovation in cultural authenticity and adapting to global market demands, Jodhpur’s wooden furniture sector can transform into a resilient, sustainable, and competitive export cluster. The paper contributes insights into how traditional artisanal sectors in emerging economies can successfully integrate modern entrepreneurial innovation without losing their heritage identity.