The knowledge spillover theory of entrepreneurship seeks to explain the sources of entrepreneurship and its consequences with regard to economic performance. This paper extends the theory and links it to innovation performance. We propose that a high rate of entrepreneurship facilitates the process of turning knowledge into innovative products, while it has no effect on the relationship between knowledge and imitative products. We use European country-level data to test our propositions. Our results show that a high rate of entrepreneurship increases the chances that knowledge will turn into innovative products. The findings highlight the importance of entrepreneurs in the process of the commercialization of knowledge. Implications for innovation policy are discussed.