This chapter aims to contribute to the research on innovation, entrepreneurship and their determinants by investigating these issues in two Swedish regions - Jonkoping County and Jamtland. Jonkoping County is representative for a rural and peri-urban area, with a central location in Sweden. Firm innovativeness is an important dimension of entrepreneurship and is regarded as playing a vital role for firm growth, including for firms located in rural areas. The ability of firms to renew themselves is becoming increasingly important from the perspective of firm survival and growth. The county has a strong entrepreneurial and small firm tradition in the manufacturing sector. The town of Gnosjo is famous for its “entrepreneurial spirit” and flexible small firms that both compete and cooperate. The county has a strong entrepreneurial and small firm tradition in manufacturing. Interesting regional differences emerge when looking at the factors that can facilitate innovation, i.e. firm size and human capital characteristics.