Across many developed economies, policy foregrounds the role of innovation in stimulating economic recovery and underpinning growth. Higher education is expected to contribute significantly to the innovation agenda. This paper examines one example of innovation in the UK higher education context, namely the creation of a spinout company, and explores its implications for the individual knowledge worker. Focusing on the developing professional identities of those involved, the narrative draws on data from an ethnographic study of the birth of a university spinout company and its eventual launch as an independent company. Utilising the concept of "third space" to frame the spinout experience, it argues that individuals engaging in "innovative" activities of a commercial nature in higher education develop hybrid roles at the margins of their organisations. The extent to which these are tenable over the longer term is debated.