The aim of this thesis is to provide insights as to how innovation may be influenced byknowledge and learning. This is done through assessing what drivers of innovationStatoilHydro is operating under, and how the company develop and use knowledge underthese conditions. The oil and gas industry is subject to specific conditions related to marketand regulations, which calls for the development of particular competencies related toknowledge. Development and use of knowledge is crucial to meet innovation-challenges, anddoes not follow some automatic pattern. In order to increase the understanding of howinnovation comes about in StatoilHydro, I have applied an analytical framework whichsituates StatoilHydro in its larger sectoral and technological context, and considers differentmodes of learning and innovation. In addition to this I have also applied literature onorganizational practices related to learning and knowledge. The main emphasis of this thesisis on different practices which are seen to enhance the development of knowledge andconsequently, innovation.