Geographers have increasingly criticized the absence of theoretical rigour characterizing ­studies of the tourism production system. Tourism entrepreneurship is one related research area that has not received the level of attention it deserves. Additionally, the role that innovation plays in small and medium tourism enterprises (SMTEs) has not been examined in depth. This paper focuses on a study of entrepreneurial activity among SMTEs in a peripheral region, namely the Danish island of Bornholm. The study is based on thirty in-depth, non-random, structured interviews with owners of tourism-related enterprises. An examination of the key characteristics of these SMTEs provides evidence that most can be described as ‘gap-fillers’, companies operated by so-called ‘constrained’ or ‘non-entrepreneurs’, which do not display evidence of having adopted significant product or process innovations. Among the key ­barriers to innovation identified are the extreme seasonality plaguing the island’s tourist industry and, related to this, the uncompetitive nature of the existing tourist industry.