Entrepreneurship and innovation are two closed words which are used in the present world market in business practice, research scholar, and in policymaking. It is very difficult to understand that they are different from each other. Entrepreneurship and innovation have multiple meanings. Both are related to each other. As well-known definitions given by the Schumpeter who defined entrepreneurs are individuals which bring innovation to be manager and leader need to have different ideas to change the global economy. The external and internal business environments both have been driven by entrepreneurship. Today in a competitive and dynamic environment every organization needs to adopt an entrepreneurial strategy and innovative skills to sustain and to develop in the market they have to continuously be innovative. The paper aims to focus on the relationship between entrepreneurship and innovation which creates changes and opportunities in businesses. How through innovation it diverts their business into a sustainable competitive advantage.