In this paper we explore the concept of informal innovation by investigating it both on the input (activities) and output (impact) side of the innovation process. Informal innovation is defined as innovation that is not explicitly planned and budgeted and therefore remains largely hidden in (aggregate) innovation data. We take a statistical approach to reveal the significant potential of informal innovation. We furthermore conceptualize and operationalize informal innovation as an activity taking place without R&D (in non-R&D firms). In general, on the input side, we show that around half of the innovative firms in our sample (of innovative firms in the Swiss Innovation Survey of 2002) develop innovations without any R&D. Moreover, on the output side, over one third of the innovative sales and production cost reductions can be attributed to informal innovation. Although the results appear to be rather pervasive, they are strongest for small firms, low-tech firms and firms in service industries. This leads us to conclude that informal innovation is not just an important complement to formal innovation – as scarcely acknowledged in literature – but that is largely takes place next to and as a substitute for formal innovation as well – which is largely neglected in literature to date. We furthermore explore the possible attributes of the process of informal innovation and develop a preliminary framework that needs to be investigated into further detail by future research. In particular, we argue that ‘on-line’ activities are a crucial part of the innovation process, although it has been largely neglected to date. It becomes clear that the literature on learning-by-doing and learning-by-using needs to be expanded by more explicitly focusing on the processes that are at the heart of the (informal) innovation process in order to clearly show the sources of innovation. In order to do this, we indicate some possible avenues for future research to improve the measurement of (informal) innovation.