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Abstract

Thispaper develops process theory on how service firms deal with persistent economic decline and the practices they adopt to overcome it. It examines how a knowledge-based service activity— commercial archeology— attempts to overcome environmental constraints of increasing complexity and economic downturn, as it unfolded over an 8-year period.This longitudinal,multimethod field study illustrates how confronting an external crisis may actually lead surviving firms to attempt innovation actions, a critical factor in achieving organizational renewal. Findings suggest that therenewal ability of highly dynamic services hingeson which innovation activities firms select and adopt, whether they implement them effectively, and the consequences of such implementations. This article contributes to the development of theory about the role of organizational innovation in service adaptation by offering insight into the link between strategic renewal and innovation activities.

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