This paper focuses on the challenges in managing innovation within supply networks. We present an empirical study on innovation collaboration between a focal company and its supply network of small and medium sized enterprises. By analysing the case from the viewpoints of the focal company, the suppliers and investors we point out three controversial issues in innovation management within the supply network: intellectual property rights, partnering versus competition, and commitment versus independency. Furthermore, we analyse the suppliers' positions with a purchasing portfolio model and present implications for innovation management practices in supply chains.