Several studies have suggested virtual enterprises (VEs) as a promising new form of organization. VEs are created to gain several benefits, for example, risk-and-revenue sharing, entering new markets, etc. However, in this study we focus on increasing the innovation in the VE consortiums. Based on past experience and knowledge from related fields, we argue that VE consortiums in the Swedish industry are rare. Thus, this study highlights and explores the challenges, particularly four areas: networking capability, information and communication technology (ICT) usage, knowledge engineering, and team based innovation. These areas contribute to the facilitation of VE creation and its effective operation. Each of these areas is discussed and propositions are formed which will guide the future research. Finally, we have discussed the concept of innovation driven virtual enterprise that combines open innovation ideology with the virtual enterprise concept.