The aim of this research was to understand the entrepreneurial networking process and the role played by virtual interactions. In particular, the objective was to establishing how, and if, virtual interactions enhanced collaborative incremental product innovation in supplier-customer networks within biotechnology SMEs (Small and Medium Sized Enterprises). Employing a phenomenological approach, two data collection techniques were used; participant observation within a small biotechnology firm provided a preliminary study and was followed by 16 in-depth interviews with bioscience entrepreneurs in SMEs in Scotland. The results indicated that entrepreneurial networking was important for the generation of collaborative incremental innovation; innovation opportunities were embedded in entrepreneurial networking process. In addition, the study found that the networking process was complex and dynamic but was punctuated by several relationship stages, whereby each stage constituted a relationship state. Each state could be characterized as dynamic and complex but an evolving relationship stage. The progress of collaboration was thus dependent on the evolution of the relationship. Moreover, the research identified trust to be the key determinant of the relationship process; the nature of trust invoked was found to be dynamic, progressive and multi-dimensional. The study explored and classified how the entrepreneurs used three “ideal types” of networking strategies to engage in the trust formation process. These were, namely, Technical, Combined and Social Approach, utilised in different relationship situations. Furthermore, the study showed how factors, such as inter-personal characteristics for bonding social capital, the use of virtual interaction, trust process, the level of knowledge tacitness and relationship processes, all impacted on the collaboration for incremental innovation. Importantly, the study indicated that an understanding of virtual interaction needed to be contextualised in the circumstances and conditions of the entrepreneurial networking process. Consequently this study contributes to knowledge in the areas of entrepreneurial networking process, virtual interaction, supplier-customer relationships, trust and product innovation generation.