Innovation in strategic positioning enables companies to redefine the way to do business delivering more value to customers and achieving superior competitive performances. We present a System Dynamics simulation model in which the firmís ability to generate and implement innovation in strategic positioning is determined by three factors. Firstly it is related to the ability to govern the technical innovation process. Secondly strategic innovation processes occur in firms characterised by a certain degree of entrepreneurial orientation. Entrepreneurial orientation is deeply influenced by the introduction of organisational innovations that allow the release of the entrepreneurial energy embedded in the organisational structure. Thirdly, technical innovations become strategic innovations only if top managers are able to manage a process of integration through which they integrate new technical initiatives into the companyís strategy. Simulations showed that the effectiveness of innovation processes is influenced by top managersí ability to balance the entrepreneurial orientation of middle-level managers with a high degree of discipline. It is essential for top managers to control the quality of innovations rather than to stimulate a relevant flow of innovations. Only by controlling the quality at different stages and during the integration phase can top managers assure a successful strategic renewal process.