ABSTRACT The paper introduces a theoretical framework to understand the nexus between entrepreneurship process and innovation. The paper focuses both the opportunity exploration phase, since it is essential and initial phase of the entrepreneurship process, and the opportunity exploitation phase, since it enhances the phase of entrepreneurship process by realizing the creativity and introducing the innovation. By defining the differences between the phases the paper also aims to separate the phases and put forward to different effects of cognitive and environmental factors on the phases. The paper is important since it focuses opportunity related phases of entrepreneurship and introduces a holistic and process based model for the future researches to investigate the link between entrepreneurship and innovation. The paper both emphasizes the role of entrepreneurship in innovation and explores the cognitive and institutional environmental factors, affecting the value of innovation. It is believed that increasing comprehension in the entrepreneurship process also increases the value of outcome which is called innovation.