Human evolution has always been tied with innovations. Typical innovations that are mentioned in literature which changed the course of human history involve the Internet, cars and even the wheel. Every major change involving human civilization is tied to innovations. However, it needs to be noticed that this process isn't working conversely: not every innovation is successful and that doesn't mean that every innovation is something new to the civilization. There are many innovations that never found their use. Innovation is important in entrepreneurship. In a highly competitive world in which modern economy is taking place, innovative ideas are the thing that will enable the entrepreneur to achieve competitive advantage. The entrepreneurs goal is to make an outstanding product, strong brand and build his customer network, to succeed in that he needs to be innovative. Innovation doesn't always mean to make something new: innovators often take something that already exists, improve it, change it and make it the best for their customers. Innovative ideas are the thing that will make the entrepreneurship competitive. In this paper it is presented which are the most important principles of innovations, defining innovations and analysis of notion and process of innovations and innovation in professional economic literature, it is also presented the process of innovations development through preconditions for innovations, classification of innovations and testing of innovations as the indispensable process every entrepreneurship has to go through if they want to be sure that innovations will bring competitive advantage to display the advantages which innovations bring to entrepreneurs and a way how can entrepreneurship develop in the innovative climate.