A number of studies suggest prior knowledge provides the means to unlock the mystery of why some recognize opportunities and not others (e.g., Ronstadt, 1988; Shane, 2000). Another challenge within opportunity research relates to the way opportunities are measured and empirically tested. Given the central importance of innovation to entrepreneurship (e.g., Covin & Miles, 1999), scholars have called for measures of innovativeness in opportunity research (Fiet, 2002; Morris & Kuratko, 2002). The purpose of this paper is to address these twin challenges—increasing our understanding of the role of prior knowledge during opportunity recognition and linking opportunity recognition to innovation outcomes. A constructivist view of Shane’s (2000) prior knowledge framework is used and includes markets, customer problems, ways to serve markets, and technology. The research provides a deeper understanding of the types of knowledge that facilitate opportunity recognition and their affect on subsequent innovation outcomes using a continuum of incremental and radical innovation.