The chapter discusses typical features of innovation activity in peripheral regions; regions located outside daily commuting distance from large cities. Such regions exhibit different place-specific conditions to those found in dynamic core regions, which cause peripherally located firms to innovate in certain ways. Many peripheral regions are characterized by organizationally thin regional innovation systems and bonding social capital. These are features that stimulate incremental innovations based on experience-based knowledge, which is typical of the Doing-Using-Interacting (DUI) innovation mode. Characteristics such as many DUI innovations, little local knowledge flow, low related variety of knowledge and technology and high levels of bonding social capital may result in peripheral regions becoming trapped in path extension: firms and industries strengthen their existing activity through incremental innovation, while the development of new activities through radical innovations is difficult to achieve. Firms in peripheral regions, in particular, need to source extra-regional knowledge in order to achieve more radical innovation activity. Reliance on extra-regional knowledge sources also points to the fact that external investments and policy initiatives are especially important for industrial development in peripheral regions. Firms in peripheral regions, however, need to develop organizational learning strategies in order to be able to exploit external knowledge from distant sources in their internal innovation processes.