Firms’ innovation performance and productivity depend on engaging the entire organisation in the innovation process. Going beyond the typical focus on R&D, the focus of this article is on engaging those employees who are active in ‘productive’ activities in innovation. This article explores how a firm can create an environment in which those employees can build on their local needs and knowledge to learn and innovate through a process of experimentation and problem solving during ‘on-the-job’ activities. I draw on innovation, creativity and organisational climate research to explore the determinants and effects of such innovative behaviour. I develop a theoretical framework of how organisational practices affect employees’ willingness and ability to experiment – a behavioural integral to innovation. I furthermore argue that the relationship between such ‘climate for innovation’ and the ultimate performance is inverse U-shaped. The framework implies that managers can turn the entire organisation into an innovation lab but they need to balance the tension between productive and innovative practices.