Exploiting the developmental potential of innovation for marginalised communities requires a context-specific understanding of the features and mechanics of innovation. In this article we explore the nature of innovation with the aid of evidence collected from formal and informal enterprises in rural district municipalities (RDMs) in South Africa. It is a complex socio-economic space which invites rethinking of traditional notions of innovation: the rigid divide between formal and informal innovations, fluid spatial scales of innovation and interactions across actors and sectors. The findings contribute to our understanding of innovations, innovation activities and their place in our society by illustrating that narrow views about the origin and formality of innovators and innovations obscure the reality. Informal innovations occur within and are undertaken by actors in the so-called informal and formal sectors of the rural economy and, despite their location in different parts of the local economy and the possible differences in complexity of the outputs, the innovation characteristics are similar and resemble those of informal innovation. These findings identify four areas for policy action.