Purpose – The paper contributes to the debate about local food and conceptualization of ruralentrepreneurship by analysing the performance of small-scale dairies departing from their relation toinnovations, innovative activities and risk.

Design/methodology/approach – The authors use phenomenography to identify representative categories,and to draw conclusions about how these are consistent or different from dominant definitions of ruralentrepreneurship and self-employment. The authors conducted semi-structured interviews, participatoryworkshops and compiled a database of all small-scale dairies established between 1968 and 2020.

Findings – A focus on innovations contributes to differentiate between rural entrepreneurship and selfemployment and how these interact in the process of economic growth. Innovations are seldom disruptive.Instead, innovative behaviour is strongly related to business models and to imitation. Social capital andcollective action play a key role for the innovative capacity of small businesses, especially to realize disruptiveinnovations, such as the establishment of a new market.Research

limitations/implications – The innovative capacity of rural businesses can be understoodthrough their ability to break patterns, alter institutions and turn embededdness into assets. Rural entrepreneurship and self-employment are intertwined in the economic growth process.

Practical implications – Innovative behaviour is a significant aspect for firm survival over time, and it isalso strongly related to new business models. Most rural firms can be characterized as self-employment, thelatter are essential because they provide rural livelihoods and help bring maturity to newly establishedmarkets.

Social implications – The right type of support, e.g. adopting enabling industrial regulations and grantingaccess to constructive experiences of others, contributes to the innovative behaviour of small-scale rural firms.

Originality/value – This study differentiates rural entrepreneurship from rural self-employment byanalysing the role of innovation. The authors show how innovations and innovative behaviour work their waythrough the process of economic growth and how innovation can break patterns by turning ruralembeddedness into assets; and how innovative behaviour related to self-employments contributes to thecreation of value and interacts with entrepreneurship in the process of economic growth.