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Examines the process of managerial learning in a relatively remote rural small‐sized firm. Relational competences and organisational innovation are key to the capture, employment and creation of knowledge and learning within the firm. The case study organisation has created a virtual cluster of innovation, through their supply network, that reaches well beyond the traditional regional institutional support mechanisms. Through this network of relationships, they have enhanced their own learning, facilitated the learning of supplier firms and integrated knowledge to create opportunities for product innovation and development. The paper concludes that these learning experiences indicate policy implications for the support of learning in small firms. To overcome failings in traditional support systems, policy should be directed at the development and maintenance of learning networks. This informal and organisational specific approach to learning and development overcomes some of the barriers to managerial learning in SMEs, and is a method that will address the specific business needs of small firms.

Schumpeter (1943) linked innovation to the creation of a dynamic economy: ‘The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumer goods, the new methods of production or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise creates’. In other words, both product and process innovations are central to the ability of firms to establish competitive advantage over their rivals. However, in many industries it is increasingly difficult to differentiate between product and process innovations. Financial services organisations rely on technology as a means of facilitating or delivering new products. Even in traditional manufacturing industries the distinction between product and process innovation is becoming blurred.