service response to economic decline: innovation actions for achieving strategic renewal

Service response to economic decline: Innovation actions for achievingstrategic renewal☆

Carlos Martin-Rios a,⁎, Eva Parga-Dans b

a Ecole hôtelière de Lausanne, HES-SO, University of Applied Sciences Western Switzerland, Switzerlandb Universidad de A Coruña, Spain

a b s t r a c ta r t i c l e i n f o

Article history:Received 7 May 2014Received in revised form 21 December 2015Accepted 21 December 2015Available online xxxx

This paper develops process theory on how service firms dealwith persistent economic decline and the practicesthey adopt to overcome it. It examines how a knowledge-based service activity — commercial archeology — at-tempts to overcome environmental constraints of increasing complexity and economic downturn, as it unfoldedover an 8-year period. This longitudinal, multimethod field study illustrates how confronting an external crisismay actually lead surviving firms to attempt innovation actions, a critical factor in achieving organizational re-newal. Findings suggest that the renewal ability of highly dynamic services hinges onwhich innovation activitiesfirms select and adopt, whether they implement them effectively, and the consequences of suchimplementations. This article contributes to the development of theory about the role of organizational innova-tion in service adaptation by offering insight into the link between strategic renewal and innovation activities.

© 2015 Published by Elsevier Inc.

Keywords:Economic downturnStrategic renewalOrganizational innovationService firmsProcess theorization

1. Introduction

All business organizations experience external economic threats.Literature shows that firms that purposively address conditions of eco-nomic declinewith operational and strategically planned actions have abetter chance of renewal and sustainable success (McKinley, Latham, &Braun, 2014). Defined as a firm's ability to disrupt inertia by modifyingor replacing its resource base to ensure long-term performance and sur-vival (Agarwal & Helfat, 2009), several authors (e.g., Schmitt, Barker,Raisch, & Whetten, 2015) have emphasized the strategic renewal con-cept as a means to cope with decline. Studies document how financial,managerial, and operational actions enable firms to deal with externaldecline situations (Mone, McKinley, & Barker, 1998). Those studies typ-ically address responses by manufacturing firms to short-term externalthreats (Ndofor, Vanevenhoven, & Barker, 2013). Less is known, howev-er, about how services, particularly knowledge-based service providers

(Castellacci, 2008), fare in the face of external crisis and the practicesthey adopt to overcome it. Due to the distinctive nature of its businessand organization, services may deploy specific innovation actions thatentail strategic renewal. These strategic transformations become evenmore relevant amid persistent economic depression, during which in-cremental actions might not be enough to guarantee firm survival(Schmitt et al., 2015).

Most of the empirical literature in the field has focused on identifyingrelationships between crisis and specific management actions (resourceacquisition, product re-positioning and service output) (e.g., Bohman &Johansson, 1998). Focusing on the strategic renewal processes associatedwith economic threats offers the opportunity to examine how serviceinnovation — encompassing product, process, and organizationalinnovations — facilitates adaptation and renewal. This raises thefollowing question: In knowledge-based services, what is the nature anddynamics of strategic renewal activities in coping with economic turbulenceand uncertainty?

Spanish commercial archeology is the empirical context of theanalysis. This paper reports longitudinal field research on innovationinitiatives leading to service renewal of Spanish archeological firms.Our mixed method approach combines qualitative and quantitativedata drawn fromdifferent sources (in-depth interviews, survey data, ar-chival data, and qualitative case comparisons) and at different times(2005–2013) in the same design, together with a participatory ap-proach that relies on expert opinion (Shah & Corley, 2006). Commercialarcheology is characterized as science-based, human-capital intensive(Miozzo & Soete, 2001), and advanced-knowledge provider(Castellacci, 2008). It is a recent activity that emerged after the

Journal of Business Research xxx (2015) xxx–xxx

☆ The authors thank the Instituto Ciencias del Patrimonio (CSIC, Spain) for its support insecuring interviews with CEOs, senior managers and scholars. We particularly wish tothank Susana Pasamar, Universidad Pablo de Olavide and Jon Sundbo, RoskildeUniversity for reading and comments of the manuscript. The authors are indebted toAchim Schmitt Ecole hôtelière de Lausanne, whose comments and suggestions improvedthe paper inmanyways.We thankMarta Elvira and participants of the 2012MadridWork& Organization Workshop as well as Niclas Erhardt and faculty of the University of Mainefor their helpful comments and suggestions.⁎ Corresponding author: Ecole hôtelière de Lausanne, HES-SO, University of Applied

Sciences Western Switzerland, Route de Cojonnex 18, 1000 Lausanne 25, Switzerland.Tel.: +41 21 785 18 20; fax: +41 21 785 11 21.

E-mail address: [email protected] (C. Martin-Rios).

JBR-08794; No of Pages 11

http://dx.doi.org/10.1016/j.jbusres.2015.12.0580148-2963/© 2015 Published by Elsevier Inc.

Contents lists available at ScienceDirect

Journal of Business Research

Please cite this article as: Martin-Rios, C., & Parga-Dans, E., Service response to economic decline: Innovation actions for achieving strategicrenewal, Journal of Business Research (2015), http://dx.doi.org/10.1016/j.jbusres.2015.12.058

introduction of private sector principles into archeological services(from excavation, restauration, and preservation to management anddisplay of cultural heritage). Before the global financial crisis in 2008(Guillen & Suarez, 2010), construction-related activities (housing certi-fication) accounted for a sizable proportion of profits, whereby culturalheritagemanagementwas funded by public agencies. Soon after the cri-sis broke out, margins were compressed. Spanish archeological industryexperienced an unremitting downturn during 2008–2012 with about50% of firms exiting the market.

To address our research question, we apply process theorization(Langley, 1999) to the strategic renewal framework grounded in thework of Agarwal and Helfat (2009). Process theorization facilitatesunderstanding how (and why) events develop over time by means ofconceptualizing and detecting patterns among the events under study.Thus, a process theory of strategic renewal applies as a response ofarcheological firms to decline, since the underlying framework is evolu-tionary in nature.

The unique contribution of this paper lies in providing evidence ofwithin-industry heterogeneity in strategic renewal efforts and out-comes. It shows how certain archeological firms respond to environ-mental scarcity by means of discontinuous transformations that helpreinvent their service offering. A crucial element of these responses istheir reliance on non-technological innovation, particularly organiza-tional innovation (hereinafter OI) (Camison & Villar-Lopez, 2014). Wepropose that OI constitutes the main discontinuous transformation forservices that face environmental turbulence and economic hardshipover a sustained period. The implications of this study are quite exten-sive, given that archeological firms, as advanced-knowledge providers,find themselves deeply affected by managerial challenges in terms ofanticipating and reacting to changes in the environment, particularlyin the treatment of cultural heritage as a commodity to generateadded value (Castañer, 2013; Martin-Rios & Parga, 2015).

2. Literature

Adverse environmental conditions, including difficult-to-foresee ex-ternal events or “competence-destroying change” (Volberda & Lewin,2003), such as changes in customer demand or persistent economicdownturn, pose severe challenges to industries andfirms. Organizationsface dramatic shifts in its external economic environment that renderexisting strategies ineffective and lead to decline. Organizational declinerefers to whenever a firm's performance or resource base deterioratesover a sustained period (Mone et al., 1998). Strategic renewal enablesorganizations to innovate and adapt by fundamentally altering aspectsof its strategy and organization. Agarwal and Helfat's (2009) theoreticalmodel of strategic renewal included incremental and discontinuousrenewal activities. Incremental renewal includes experimentation andincremental alterations to some particular firm's core businesses.Strategic renewal further encompasses discontinuous strategic trans-formations. These include replacing multiple dimensions, includingthe businessmodel, resources and capabilities, technological base, orga-nizational structure, and organizational identity.

Research shows that incremental actions alone are insufficient tospur renewal (Chowdhury, 1996). In contrast, transformation actionsare the driver of strategic renewal in the aftermath of an economicslump (Makkonen, Pohjola, Olkkonen, & Koponen, 2014). Research in-vestigates innovation practices as one strategically planned action(Martens, Matthyssens, & Vandenbempt, 2012). These studies focuson technological change initiatives related to new products, processes,and R&D activities inmanufacturing firms (Kim& Pennings, 2009). Lon-gitudinal research examining service decline and renewal is still in itsinfancy. Little theoretical headway has been made in this area; there isscarce evidence on how knowledge-based services respond to adverseexternal conditions, and in what ways innovation effects strategicrenewal.

2.1. Organizational Innovation and decline

Empirical evidence on the renewal of services is limited. Researchpoints out the relevance of innovation capabilities, in terms of changesin organizational practices, leadership, or external relationships(Jimenez-Jimenez & Sanz-Valle, 2011). For example, Zuñiga-Vicenteand Vicente-Lorente (2006) suggested that, in services, innovationdiversification was negatively associated with organizational failure.Service innovation includes a range of innovative activities from techno-logical (product and process) to non-technological, OI conceptualized asthe introduction of a new practice, process or structure that improvesthe effectiveness or performance of the adopting firm (Birkinshaw,Hamel, & Mol, 2008). These include the adoption of new ways of orga-nizing work processes, alternative ways of managing employees, andfostering internal and external relationships (Armbruster, Bikfalvi,Kinkel, & Lay, 2008). The literature claims that the adoption of techno-logical innovations alone cannot sustain service competitiveness; thefull benefit of those innovations is only achieved if specific OI is alsoadopted (Ettlie & Rosenthal, 2011; Martin-Rios & Parga, 2015). Success-ful OI is challenging as it questions existing practices and ingrained as-sumptions about the status quo (Frambach & Schillewaert, 2002). It isalso far-reaching, difficult to imitate, and a potential source of competi-tive advantage for services (Camison & Villar-Lopez, 2014; Ganter &Hecker, 2013, 2014; Hervas-Oliver & Sempere-Ripoll, 2015).

Addressing the adoption of innovation pathways is critical to under-standinghow servicefirms respond to environmental crisis and attemptrenewal. This is especially the case for added-value services, which areremarkably sensitive to economic and environmental dynamics. Thesebusinesses supply science- or knowledge-based services, involvinghigh levels of service and organizational interdependence (Castellacci,2008). For companies that provide advanced-knowledge services, re-newal may relate to innovation activities. However, in the absence ofprevious studies, the process of service renewal in the context of eco-nomic downturn to affect remains to be determined.

3. The research process

3.1. The research case

The preservation of cultural and heritage assets became crucial afterthe huge destruction of such elements in the two World Wars and thepassing of international accords, such as the European Valetta Conven-tion (1992) to protect and manage heritage assets. Countries imple-mented a model of heritage management in line with their specificcontext and resources based on one of two main models. One is the“public management model” in use in the majority of industrializedcountries, and the other is the commercial or “mixed managementmodel”. The former gives priority to conservation actions by the publicauthorities and non-profit organizations (as is the case in France orGreece), while the latter rests on private initiative under the supervisionof the governmental authorities. This commercial model is firmlyestablished in Anglo-Saxon countries (Aitchison, 2009) as well as inSpain, where private initiative has only taken place recently.

In Spain, national economic prosperity during the first half of the2000s, coupled with the professionalization of the activity, resulted inthe creation of an unprecedented number of new archeological firms(nearly double the number of companies compared with the US andUK). Early success, or a jump-start, in commercial archeologywasmain-ly due to the passage of theHistorical Heritage Law (1985) that requiresto obtain legal permission (certification) prior to any intervention in thefield, and the construction boom in 2000–2006, which led to an expo-nential increase in the demand for certifications. Whereas constructionactivity represented, on average, 7.7% of Spain's GDP in 1980–1990, itreached its peak in 2006 accounting for more than 12% of GDP. Enforce-ment of the law during the construction surge helped commercial ar-cheology to nourish; public administrations handed certification over

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to accredited archeologists, giving rise to the expansion of the commer-cial archeological activity. Business opportunities in the archeologicalsector were commonplace from 1999 to 2006. The global financial crisisof 2007 and the resulting 2008–2012 recession, seriously affected theSpanish economy, which faced a severe housing market correction, anindustrial slump, and a banking crisis. The economic downturn had anegative impact on archeological activity, resulting in hazardous eco-nomic conditions and low rates of firm survival. With some delay, thenumber of archeological firms began to decline in 2008. The relative ex-haustion of the prevailing business model led to an abrupt decline,resulting in the disappearance of a large number of companies and, forthose remaining, the need to explore renewal actions associated withnew business initiatives.

3.2. Research design and data collection

This paper reports longitudinal field research on the innovation se-lection and adaptation dynamics to economic decline leading to servicerenewal. Carried out between 2005 and 2013, this is the first longitudi-nal study of the Spanish archeological industry. Table 1 describes themethodological approaches applied. Our mixed method approachcaptures a complete, holistic and contextual portrayal of the researchquestion being studied by combining qualitative and quantitative datadrawn from different sources and at different times in the same design(Shah & Corley, 2006). The use of multiple sources for the empirical in-quiry allows the study to address a “broader range of historical, attitudi-nal, and behavioral issues” (Yin, 2003: 98). Access to such awide varietyof information sources facilitates triangulation (Denzin, 1978). The ef-fectiveness of triangulation rests on the premise that the weaknessesin each single method will be compensated by the counter-balancingstrengths of another (Jick, 1979), increasing confidence and validity inthe findings (Eisenhardt, 1989).

3.3. Qualitative data

Prior to data collection, an expert panel of five scientific experts andthree accredited specialists in heritage management was convened andtasked with: 1) identifying socio-economic issues in the commercialarcheological field, as well as cutting-edge trends in the archeologicaleconomic activity at large, and 2) developing and prioritizing recom-mendations for archeological firms in aspects related to strategic man-agement, work organization and management, and innovationstrategy. Conclusions helped us delimit the activity, design and validatea questionnaire, and define an interview protocol.

The second data source, semi-structured interviews, aimed to tracethe events associated with environmental crisis. 107 key informantswere interviewed (Table 2). Data collection involved CEOs andmanage-ment teams from selected firms, and experts from research centers,universities, and public authorities. Participation was voluntary and an-onymity and confidentiality of responses were assured. The interviewsranged from 50 to 100 min. They were digitally recorded, with theinterviewee's permission, and transcriptions were made of all relevantportions. A semi-structured interview template was used to guide theresearch. Specific questions were posed to practitioners and academics.Academics and industry experts addressed aspects pertaining to theeconomic, legal, and institutional environment; whereas professionalsaddressed the reasons why firms engaged in or resisted adaptationand renewal initiatives and several aspects of the innovation–economiccrisis interaction.

The third data source, in-depth case studies of four particular firms,was carried out in 2011–2012. Our objective was to obtain first-handdata from best practice cases in innovation initiatives to overcomeeconomic decline. We surveyed ten experts to make a list ofsuccessful/unsuccessful firms in terms of innovation activities(i.e., more or less technological and/or non-technological innovation),strategies (i.e., new services versus traditional services) and financialresults (i.e. greater market share and higher profit ratios since the be-ginning of the crisis) based on their qualitative perceptions. To ensurea common understanding of the concepts, definitions of innovation,strategy, and firm results extracted from our questionnaire were pro-vided. Using the recall-method, each expert generated a list of firms.This so-called ‘quick list’ is an open field where the interviewee entersthose firms s/he considers representative of each of the categories insequential order. The result was a list of 31 firms (21 as relativelyprofitable and successful at innovating and 10 as unprofitable andnon-innovative). To check the reliability of the list, we compared the fi-nancial results of the companies listed by the experts with a randomsample of archeological companies. The “successful” companies on thelist generated higher profits and return on investment. On the flipside, the “unsuccessful” firms registered downsizing and performancedecrease until liquidation. We chose the three companies mostfrequently listed to complete a detailed case study of the determiningfactors, processes, and features of their pathways. We also choose an il-lustrative case of failure, one that endured financial strain withoutattempting strategic transformation until it filed for bankruptcy. Dataon the four firms were collected from in-depth interviews at the select-ed firms, secondary sources (internal memos) and publicly availableliterature.

Table 1Methodological approaches.

Period Method Activities Results

2005 Expert panel - SWOT analysis- Define innovation model

Report from 8 experts

2005–12 Qualitative interviews - Face-to-face and phone interviews 107 semi-structured interviews2007–13 Identification firm population Sources:

- Local, regional administrations- Professional associations, unions, and others- Iberian Balance Sheet Analysis System (SABI)- Adverts, blogs, websites- Snowball sampling technique

- Directory 273 firms (2009)- Second directory 158 firms (2013)

2008–09 Legal/administrative information - Regulations on archeological heritage all administrative regions- Data on each region's administration structure and competence

Report on legal situation and regulatory differencesin Spain

2008–09 Quantitative questionnaire - Survey design- Self-administered online- Completed with phone interviews- Response rate: 77%

Statistics from 217 firms on innovation initiatives

2011 Mini-questionnaire for experts - Quick-list (open field) survey to 10 experts in Spanisharcheology

Selection of successful and non-successful companycases

2011–12 Exemplary cases - In-depth interviews and secondary information Success and failure case studies

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3.4. Data analysis

We aimed to develop process theory rather than identifying rela-tionships between a set of discrete variables. Process theory and processdata help to focus on processes of renewal initiatives variation, selec-tion, and retention among services (Pentland, 1999; Van de Ven &Poole, 1995). Its evolutionary perspective, or what Tsoukas and Chia(2002) refer to as "organizational becoming", is suitable for the analysisof knowledge-based service adaptation to turbulent contexts. The anal-ysis was carried out using a temporal bracketing strategy (Langley,1999). Similar to other process theory studies (Burgelman, 1994), ourapproach was driven by both received theory (deductive) and actualdata (inductive). A subset of interview accounts served to create an out-line of the critical events, helping trace the course of archeological activ-ity in Spain. Secondary sources of information, such as media reports,were then used to validate the details of the proposed timeline.We con-ducted our event history analysis around a thematic analysis to identifypatterns of choice and implementation emerged and developed overtime. Successive rounds of interviews were then used to probe firms'transformation processes and innovation initiatives and to understandwhy these particular practices were implemented at different times.Rather than focusing on incremental adaption, we deliberately choseto analyze strategic, discontinuous transformation.

We applied the guidelines suggested byGlaser and Strauss (1967) toanalyze the data collected, developing empirically grounded sets of cat-egories from the interviews. Data was arrayed following the techniquefor cross-case pattern sequencing (Eisenhardt, 1989) and tabular dis-plays (Miles & Huberman, 1994). Data was analyzed via the open-coding procedure, grouped into secondary or axial codes and represent-ed here as themes. A comprehensive list of descriptive codes from theinterviews was generated. These initial codes captured the characteris-tics of the external environment during that period and how organiza-tional actors at all levels (board, management team, employees)anticipated strategic actions in order to recover from economic turbu-lence and uncertainty. Next, these descriptive open codes were reducedby sorting and grouping codes into meaningful analytical categories(axial coding).We follow an iterative process, first developing patterns,then comparing these ideas to new data from the sites, using the newdata to decide whether to retain, revise, or discard the inferences. Final-ly, categories were analyzed and grouped into broader analytical cate-gories, representing the overall theoretical foundation in order tounderstand strategic renewal actions for transformation and recovery.

3.5. Quantitative data analysis

The absence of reliable records on the population of archeologicalfirms required us to define and quantify the sector beforehand. Our da-tabase is thefirst attempt to quantify the Spanish archeological industry.

Then, we administered a survey to owners and CEOs of archeological firmsin 2009. A total of 217 responses was obtained (79.5% response rate). Oursurvey sought to identify the innovation initiatives of Spanish archeologicalfirms, and to recognize whether the adaptation and innovation strategieshad any relationship with the initial economic downturn faced by thefirms sampled. The questionnaire covered a pool of adaptation initiativesand, particularly, all aspects of innovation activities as defined in the litera-ture (OECD,2005). Inorder tooperationalizeOI,we followeda typologyde-fined in the literature (Armbruster et al., 2008; Birkinshaw et al., 2008)according to four dimensions: a) new business practices and activities;b) new ways of organizing work (organization methods and proceduresornewmethodsof organizingexternal relations); c)newhumancapital ca-pabilities (including new HRM practices); and, d) new organizational cul-ture (organizational values, communication plans, employee involvement,and leadership style). The survey also included questions about the rele-vance and consistency of distinct innovationmodes, and the organizationalconsequencesof combinationsof technological andOI. Statistics onfirmde-mographics (number of employees, qualification, experience, and turn-over) and organizational phenomena (implementation of innovations)were calculated from the survey data.

4. Findings

This section explores the ways in which archeological firms initiallysucceeded andwere then forced to evolve in response to a period of eco-nomic adversity (2008–2012). The process theory themes and criticalevents taking placewere related to three stages: the burgeoning growthof the activity, organizational decline, and adaptation and renewalthrough innovation actions, particularly OI. Table 3 provides illustrativequotes from informants, helping trace the decline and renewal processof Spanish archeological firms.

4.1. The burgeoning growth of commercial archeology

Spanish archeological firms' emergence and development took placeamid a rather complex institutional environment comprised of five dif-ferent stakeholders or institutional actors (Fig. 1). First, legal and admin-istrative public offices responsible for heritage assets facilitate andconstrain business activity by passing regulations, defining protocolsfor heritage management, and requesting services as potential clients.Second, the academic sphere (universities and research centers) stimu-lates the sector through official education, research, and the transfer ofknowledge to companies, at the same time, firms exchange knowledgeand demand human capital to academia. Third, the productive sphere(suppliers of goods and services, engineering, construction companies,and other relevant players such as museums, churches and founda-tions), which apart from being the owners of archeological and culturalassets often demands services and funds activities for archeologicalmanagement and cultural diffusion. Finally, there is the general public,the end consumers of the cultural and heritage value chain, who gradu-ally becomes a source of demand for cultural tourism, visits to exhibi-tions, sites, or museums. Archeological firms supply new servicestailored to the public, which offers business opportunities but also cre-atesmanagerial challenges, particularly in the treatment of cultural her-itage as a commodity to generate added value.

Within this regulatory and institutional framework, archeologistsformed private companies in order to capture gains arising frommarketspecialization and division of labor. The institutional context led to a va-riety of possibilities for firms to offer archeological services. Since thebeginning of this commercial activity, firms forged strong links withpublic administrations to enforce legal requirements. Results from oursurvey to firms show that, for the 2001–2010 period, the constructionindustry represented the sole client for firms (close to 85% of the samplefirms). Other potential actors (e.g. church, general public) played a lessimportant role in those early stages of the activity. Yet, the volume ofarcheological activity grew exponentially. Firms perceived this

Table 2List of interviews.

Informant profile Number

Companies 39CEOs (archeological firms) 32CEOs (construction firms) 4Entrepreneurs (spin-off) 3

Academic sphere 35University 13Research institute 13International scholars 9

Stakeholder groups 33Public administration 15Professional associations and unions 7Foundations, museums and non-profit organizations 5International experts 6

Total interviews 107



burgeoning growth to depend on partnerships with construction firms,which required specialized archeological knowledge in order for its pro-jects to take shape. This created an expanding market for archeologycompanies. It also drove them to focus their business model on

providing a quick response to the increasing demand for these services— in a similar way to the situation in the US and UK (Aitchison, 2009)—resulting in over-reliance on basic services for the constructionindustry.

Table 3Exemplary statements.

PhasesDimensions

Economic boom (2000-2006)

Economic slump (2007-2010)

Collapse and turnaround(2011-2013)

Burgeoning growth

“Things are going well. Our priorities in terms of funding are in construction and public works. We’re working on a lot of things involving a great deal of work output” (CEO, in 2005)

“Demand is at its highest. We need to work with archaeologists and specialists to carry out our [urban] development plans. While there’s the need to carry out projects, there’s work in heritage” (Public servant in 2006)

“It is a great time for archaeologists. We’re encouraged to start companies that employ surveyors, designers, computer scientists, laborers, and even security guards. The activityis beginning to consolidate" (Entrepreneur, in 2005).

“[Firms] might end up longing for the old good times when they had resources to look for new opportunities, new markets, new inroads for archaeology to progress and develop” (Consultant, International expert, in 2010)

“Private construction gave us great results. In cities, rural areas, pipelines, diversions, roads and irrigation modernization favored the out crop of archaeological remains" (CEO, in 2008).

“This is a very closed and specialized collective, whichtraditionally hasn’t paid much attention to business matters—marketing, project management, profit analysis, quality control, and so on. Many firms lost their chance to gain management knowledge when it was the right time to do so” (Scholar, in 2010)

“In the last 10 years we excavated beyond our means. It has been so excessive that it created the bubble of archeology, until prodded by construction. A return to past activity levels is unthinkable. We should have taken into account that what was happening was not real (ex.CEO, 2012).

Organizational decline

“Archaeology is starting to feel the effects of the crisis, of a downturn in private projects, but there’s still public investment. Companies are being created and getting on, although their profit margins are getting lower” (Specialist, in 2008)

“We’re at the point where everyone has to find their place; there’s work, but things are still uncertain. I think the market is too fragmentedwith way too many firms; but maybe not all of them will survive” (Director in professional association, in 2008)

“I can foresee that in the coming years, based on the downturn in the general economic situation, firms will have to restructure themselves or re-invent

“Things wentback to the way they were before, in which archaeology firms were snapping like hungry wolves to try and snatch mouthfuls that in other times they wouldn’t have even bothered with” (CEO customer firm,in 2011)

“We were trying to restructure our entire offer of services and our role in the marketplace. It was important to look for ways to apply new technologies and business offerings” (CEO, in 2012)

“We’vegot to change and diversify. Some companies were able to keep up their offer of excavations, but many others disappeared or had to merge” (Ex-CEO, in 2012)

completely because there will be money problems (private and public customers defaulting on payments, difficulties in getting credit from banks, etc.), and a lack of work to provide the level of employment we’ve seen in recent years” (Scholar, 2009)

“This situation is causing a lot changes in companies. They start up and disappear quickly in times of crisis. I’ve seen that a lot of companies are cutting things back to a minimum or have even disappeared, and others are on the verge of closing” (CEO, in 2010)

Redesign and adaptation

“The product of our work is knowledge, we are knowledge based companies. Why don’t we do just like them? The next few years must show us the need to explore new organization and work systems based on managing knowledge, optimizing and automating work, fostering creativity and productivity, etc.” (CEO, in 2010)

“I’m not trained in management, I’m an archaeologist. But as a businessman above all my work is management. As we face economic challenges in the years ahead, it will becomeessential to have people around me who had that type of training” (CEO, in 2009)

“In Spain we’ve got good archaeologists, they’ve demonstrated this by excavating, documenting, and publishing. We do it well. […] This crisis should show us to focus on what we know best instead of venturing into the unknown” (CEO, in 2010)

“The reason behind today’s successful firms is that they have known how to re-direct their activity towards the transmission of knowledge. Some of them have introduced innovation into the market, they’ve looked for an area that nobody was working in here” (Scholar, in 2011)

“There’s been a before and after in terms of innovation. We’ve finally understood that we can’t always do the same thing. We’ve got to provide a dynamic work environment fostering new ways of working, new leadership and managerial competencies” (CEO, in 2012)

“By means of changing organizationally we hope to create a stable infrastructure that allows us to bid for public funds and industrial projects. It’s difficult for us to undergo this type of transformation. Still, we’re convinced that we need to seek out alternatives to the previous model” (CEO, in 2011)

“We need to build a strong organization uponwhich we can grow. To do so, we must be willingto cooperate, transfer knowledge collaboratively, invest in R&D, and to seek out new management models in collaboration with all those involved in, interested in or concerned about heritage” (Director of Foundation, in 2011)



This approach resulted in the ability to offer standardized services withhighhumancapital intensity and lowcustomization and todifferentiate theservice offering in terms of cost reduction. Such moves, however, oftencame at the expense or sacrifice of formal innovation efforts. The over-whelmingmajority offirms innovated very irregularly.Most innovation ac-tivities took place when they perceived a specific market need. The datareveals that innovation was largely concentrated in a few active firmsthat investedmore inprocess innovation to standardize the serviceoffering,to apply information technology, and to introducemarketing activities. Lackof financial resources and internal obstacles turned out to be themajor fac-tors hampering firms' incentive to invest in innovation. As a number of

experts pointed out in the interviews, despite the favorable institutionaland market environment, the apparent success of a particular businessmodel did not encourage companies to seek out alternativemarket oppor-tunities or to explore new services with the subsequent under-use ofhuman capital.

4.2. Crisis and organizational decline

Construction had been a major engine of economic growth in Spain(Guillen & Suarez, 2010). Its quick reversal of fortune, which began inmid-2007, led to the collapse of the real estate and construction sectors

Fig. 1. Institutional configuration of the archeological activity.

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Fig. 2. Spanish archaeological activity (bars, left axis) and difference between construction activity (building permits for new constructions) and public expenditure on archaeological sites(lines, right axis), for 2001-2012 period.Source: Archaeological data obtained from the Heritage Public Offices. Housing data obtained from the Ministry of Public Works and Transport (Spain). Public expenditure on heritageobtained from the Cultural Statistical Yearbook (Spain). Data estimated for 2011.



and spilled over into archeological activity. Fig. 2 shows how the volumeof archeological activity (measured as the aggregate number of field ac-tivities) was strongly associated with the volume of construction work(measured as the number of houses built). The figure also highlightsthe steady decline in public funding for heritage initiatives (includingarcheological activity) starting in 2009.

Due to the significant economic downturn, a large number of firmswent bankrupt. The two censuses of firms populated show the effectof the economic slump on firm survival. Whereas the first censusconsisted of 273 firms in 2009, the secondwave in 2013 offered a recordof 158 firms— 58%of the original census.Mostfirms faced organization-al decline in the first stage of the environmental shock. An excessive de-pendence on the construction sector, hamperedby the underuse of theirhuman capital, led to the dominantmodel becoming exhausted and leftfirms ill-suited to coping with or adapting to such rapid and turbulentchange in market conditions. As one top manager from a successfulfirm pointed out: “The building boom catapulted us to success, andthe recession has sunk us. This crisis isn't just affecting the businessmodel; it's affecting the very foundations of the activity.”

A large proportion of the remaining firms attempted to meet thecompetition by dropping their prices drastically. Struggling firmsstrived to shake off economic gloom. To achieve higher efficiency,most firms adjusted the scale of business by means of specialization,standardization, and cost reduction. A large proportion of CEOs of small-er firms expressed that they considered this shift necessary to securecontracts with governmental agencies. However, after some delay, allpublic funding for heritage activity (archeological sites, preservationand management of cultural artifacts, and research projects)plummeted to a level below public investment in 2000. Virtually allthe top managers agreed that, initially, firms resisted change orattempted reactive adaptation measures. However, the constraints im-posed by the institutional framework (togetherwith thewider econom-ic constraints) defined the opportunity set and thus the kind of firmsthat would elude decline and eventually survive.

“What seemed to succeed failed, and what seemed to failsucceeded.” This statement from a young owner pointed toward thefailure of traditional activity and the need for alternative service oppor-tunities. The economic crisis might have brought about a mobilizationtowards renewal initiatives in archeological firms because they werefacing urgent problems that could affect their survival. However, the ini-tial adaptation responses took place in a narrow set of archeologicalfirms. Interviews and survey data together indicate that firms tendedto adapt in two ways: either specialize the existing business service orlaunch a new service (hereinafter referred to as “specialization” and“new service offering”). Rather than to support new product introduc-tions, 10% of firms surveyed in 2009 and by 20% in 2012 undertookincremental renewal through service specialization. They attempted toovercome the crisis by restricting the service provided to a narrowset of highly specialized services in a niche archeological market(satellite-based surveying, geographical information technology, andremote sensing archeology). They devoted resources to buying ad-vanced technology and to responding to newmarket demands: greaterfocus on quality management, simplified service operations, and cost-

reduction work systems to help recoup expenses. Moreover, about 5%of the firms surveyed in 2009 and up to 17% in 2012 attempteddiscontinuous transformation and radically renewed their offeringof archeology-related services as they shifted their focus fromconstruction-driven services to addressing the general public as serviceusers. To some specialists, including the director of a regional profes-sional association, the shift towards heritage and cultural managementservices marked a turning point in the industry.

Furthermore, our data suggests a relationship between renewalstrategy (in the form of specialization and new service offering) andthe development of innovation processes. However, there are innova-tion differences between both approaches. The results of the surveydata reveal a taxonomy of service offering and innovation (Table 4).We clustered service offerings into three groups and assessed theirperceived need for innovation. The first group (labelled as not innova-tive) includes traditional activity connected with excavations andarcheological impact assessment. Little or no innovation takes place inthis type of activity. A second group of firms (moderately innovative)goes into more novel business initiatives connected with specializationand related technological, mostly process innovation. A third group(highly innovative) offers new services focusing on the diversificationof cultural activities, which involved discontinuous strategic transfor-mations that stemmed from both technological and OI.

Interviewed experts drew attention to the fact that as the economiccrisis worsened it became essential not only to develop new or im-proved services in these companies but also to seek out innovativeways of managing and organizing work. Only a few leading firmsadapted their organization and work dynamics to offer innovative ser-vice solutions. They did so by implementing innovations that werenew to the industry and dramatically disrupted the archeological activ-ity. A recurring theme that emerged from the interviews was that the

Table 4Supply of archeological services, innovation actions, and percentage of firms in each category.

Innovation actionsService activity phases

Non-innovativeTraditional

Moderate innovativeSpecialization

Highly innovativeNew services

(2008–2009)Time survey 1

85% 10% 5%

(2012–2013)Time survey 2

63% 20% 17%

Variation(percentage)

−22% +10% +12%

Table 5Main OI initiatives, percentage of adopting firms (data from 2009).

Dimension Percentage Activities

New businesspractices

10% New know-how: use of technology tools,consultancy services, or the promotionof best practices in heritage

8% New knowledge not exclusively archeological(topology, environmental, pedagogy) to fosterservices

New ways oforganizing work

12% Working methods (multi-disciplinary teamsor cross level projects) to improve productioncapacity and service provision.

28% Formal and informal interfirm cooperationlevels or involve consumers in the serviceprocess.

New human capitalcapabilities

5% Hire personnel with PhD7% Hire personnel from other disciplines48% Training investment

New organizationalculture

6% New workplace practices related to jobempowerment, satisfaction andcommitment

5% Internal communication plans7% New organizational culture



archeological industry faced a “reinvent or perish” dilemma that re-quired companies to actively transform their businesses. In the case oftechnologically-innovative firms, data shows that although they expect-ed technological innovation to be effective in transforming their busi-ness, somehow they underestimated the power of OI, particularly inthe case of those firms seeking to open up new market opportunities.We cover evidence that, contrary to popular belief, investment intechnological innovation alone did not enable companies to fully recov-er financially. Foss, Laursen, and Pedersen (2011) argued that the linkfrom customer knowledge to innovation is mediated by organizationalpractices. Firms that attempt to leverage user and customer knowledgein the context of innovation must design an internal organization ap-propriate to support it. Among the CEOs interviewed, there was generalagreement that implementation of OI did help them to develop new or-ganizational capabilities as a critical prerequisite for effective service di-versification. This quote from a CEO reflects the view of manyexecutives regarding the role of OI regarding the evolving nature ofthe archeological business:

“The new panorama forces excavators to rethink the future of ar-chaeology. This shift calls for reinventing the firm […] You can'tcome up with a good management program through intuition. Weneed to place greater emphasis on management processes to adaptthe firm to the ups and downs of the business world, and we needan aggressive effort toward novel forms of organization.”

OI is classified according to four dimensions described in the litera-ture: new business practices, new ways of organizing work, newhuman capital capabilities, and new organizational culture (Armbrusteret al., 2008; Birkinshaw et al., 2008). The survey identified differencesin implementation of these innovations (multiple responses allowed,see Table 5). Whereas a remarkably high proportion of firms (28%) de-veloped collaborative ties with other firms or customers, giving way toinnovative work methods, only a small proportion of firms promotedchanges in their organizational culture.

Further quantitative analysis provided evidence that the companiesthat implemented OI were themost successful. After controlling for sizeand geographic scope, ANOVA and t-test showed significant differencesin economic performance (captured using the differences in annualsales between 2006 and 2010) between firms classified as innovativeand those classified as non-innovative (using a composite of all OI activ-ities listed in Table 5) at a 0.001 level. The ANOVA results showed amean for innovative firms of 8.216 (s = 6.303) and for unsuccessful

firms of 5.101 (s = 5.1302), an F-ratio of 12.642. Furthermore, resultsindicated that moderately innovative (adopting technological innova-tions) and high innovative firms (technological and OI) performed sig-nificantly better than non-innovative firms at a 0.001 level.

4.3. Reinvent or perish: reconception and adaptation

A seven-year period of relentless recession left the archeological in-dustry mired in a prolonged downturn. At the time of this study, firmsare nowhere near the end of the crisis. It is still early in the process tomodel the impact of innovations on long-term survival. New serviceoffering is related to changes in the institutional context, which ischaracterized by the drop in public supportiveness of heritagemanage-ment and the greater role of the general public. Mass consumption ofarcheological-derived products becomes an important source of reve-nue for firms targeting this market. Data from the 2010 Survey of Cul-tural Habits and Practices in Spain indicates that visits to museums,exhibitions, and archeological sites increased almost five percent inthe 2010–2011 period.

In late 2010, the economic crisis worsened the already fragilearcheological industry situation. Yet, our interview data suggested thatcertain firms successfully responded to environmental scarcity bymeans of discontinuous transformations of their service offering pairedwith extensive OI. To better assess the role of innovation in strategic re-newal, we selected three successful and one unsuccessful company tocarry out an in-depth case analysis of the relationship between adapta-tion and innovation (see Table 6). Successful cases illustrate how inno-vations, particularly OI, facilitated resource allocation and orchestrationand, in doing so, were crucial in facilitating renewal. An unsuccessfulcase illustrates decline in a context of organization misalignment withitsmarket nichewhen the firm's resources constrict, resulting in the de-terioration of performance.

Case A. completely revamped its service offering during the first fewyears of the crisis. The firm introduced new business practices andways of organizing its work. The key innovations were the reorganiza-tion of the firm into an organic structure, the establishment of multidis-ciplinary teams for the development of newprojects, the introduction ofa new business culture, and the development of communication andmarketing plans. As the CEO explained, “There has been a before andan after for us in terms of managing our organization. We started byinvesting in our employees' skills, addressing work routines, and oursystem infrastructure (from recruitment to a new knowledge

Table 6Summary of case studies.

Case studies Business activity Innovation strategy Portfolio of innovation initiatives Outcome

Case A: successful firm — Founded in 1994, 15 employees (2012)— Activity: cultural promotion, recreationsand exhibits; training and consultancy— +40,000 users/year

Diversification: acquiring new technology andentrance in new markets (new technology +general public)

— Organic organizational structure— Multidisciplinary teams for newproject development— New business culture— On the job training to foster creativity

Renewal

Case B: successful firm — Founded in 1996, 123 employees (2012)— Activity: management services forsociocultural activities— +150,000 visits/year

Diversification: entrance in new marketsoriented to general public

— Set up multi-disciplinary teams— New organizational culture— Collaborative structures with externalagents to create a working network

Renewal

Case C:successful firm — Founded in 2000, 33 employees (2012)— Activity: Control and monitoring ofconstruction works— 2 M€ turnover (2012)

Specialization: in heritage using the latesttechnologies, acquiring new resources

— Joint activities to strengthen relationswith external agents (firms anduniversities)— Collaborative structure— Training highly qualified personnel

Renewal

Case D: non-successfulfirm

— Founded in 2002, 10 employees (2011)— Activity: Field activities andenhancement— Income decline, lack of public funding,forced to close in 2012

None — Operating actions: cost reduction, assetand personnel reduction

Failure



management system)”. Taken together, these initiatives allowed thefirm tofocus onprocess rather thanoutput, enablingproactive adaptation. In 2012,the company had emerged as amodel for competitors to emulate. In fact, itwas expanding despite the backdrop of the crisis, with some 40,000 usersper year, and continued to innovate its service offering. Thenext innovationobjective was to combine OI with advanced technological innovations as away to enter newmarkets andoffer newservices. A seniormanager report-ed, “We're on the verge of taking another step forward by introducing openinnovation tomeet demand through the web, developing a process to dig-italize ourknow-how, andsettingupanR&D lab, throughwhichwecande-tect new demands.”

Case B. is another exemplary case of a highly adaptive firm. In 2012, thecompany employed 128 people on a permanent basis, and it was one ofthe most important archeology firms, with its displays and exhibits re-ceivingmore than 150,000 visitors per year. The firm began to grow ex-ponentially from2002 onwards on the back of a line of services aimed atheritage-based activities in schools. This line of business was a keystoneof the firm's strategy since the start of the economic downturn. Accord-ing to the CEO, “We began this adventure more than 15 years ago, andsince then we haven't stopped rolling out new projects. Our value liesin the way we have to work and adapt, through investment in training,cross-functional teamwork, and networking.” The introduction of OIcontributed to firm survival. OI helped reorganize the firm's structureinto multi-disciplinary teams to offer specialized services by means ofpromoting a collaborative business culture and introducing collabora-tive work practices. The goal was to foster activities that promotedknowledge sharing and creativity and to detect problems and deficien-cies in service processes. As a result, the company successfully devel-oped a network of internal and external agents, such as a cooperationagreement with one university, to facilitate knowledge exchanges.

Case C. illustrates a trend that has been recurrent in the activity: the com-pany opened its doors in 2000 during the construction boom andwas suc-cessful until its market share plummeted in 2008. In 2009, it attempted tofind amarket niche and had to spend large sums ofmoney to adapt its ser-vice offering to market conditions. Owners and managing directorsinvested in new technology and in an R&D strategy focused on cataloging,inventory, and 3D reconstruction. This shift allowed it to establish success-ful relationships with universities and other companies, to present jointprojects together, and to structure initiatives to share and develop theirknowledge through OI. In late 2010, the firm's market share and profitsbegan to increase. Thehead of theR&Ddepartment stated, “Wekeep tryingwhatwe knowbest: being fast and efficient by providing excellence in ser-vice with the latest technologies available”.

Case D. is an example of a firm specialized in providing services relatedto the dissemination of archeological heritage to the general public thatstruggled because its income depended exclusively on public sources.By 2008, their revenues tumbled 40% due to government budget cuts;nevertheless, working under the assuming that the reduction wasonly temporary, they decided to maintain their activity yet reducetheir workforce, cutting bothwages and the quality of services. Howev-er, by 2011, this situation became untenable. Thus, because Case D didnot adapt to the public budgets cuts, and instead waited for changesin the external environment, the firm experienced organizational de-cline which it could not overcome and eventually filed for bankruptcy.The former CEO objected, “We were expected to deliver the same re-sults; but with fewer resources, fewer employees, and within a shorterdeadline. It became more and more difficult to offer our services andwe eventually had to file for bankruptcy.”

5. Discussion

The conceptual framework and findings reported above serve asbuilding blocks for the construction of a grounded process theory of

the dynamic aspects of innovation actions for organizational renewalattempted by commercial archeology in Spain to a seven-year economicslump (Glaser & Strauss, 1967). This research highlights four core linksbetween innovation and strategic renewal whereby innovation invest-ments made by firms facing economic crisis can result in strategic re-newal. They yield several testable theoretical propositions thatcontribute to the development of a dynamic theory of the role of OI inservice renewal (Agarwal & Helfat, 2009; Mone et al., 1998).

5.1. Systemic and discontinuous service innovation

Earlier research has found several approaches to service innovation.This study suggests thatwhen advanced-knowledge services face exter-nal economic constraints, systemic innovation — innovations that arecomplex, systemic in nature and new to the industry (Teece, 1986),emerges as one source of strategic renewal. Furthermore, for servicesexperiencing decline and attempting renewal, organizational failure isalso associated with a lack of innovation initiatives. Companiesimplementing innovation actions specifically designed to overcomemajor decline in service activity and performance over several yearsshow better results in dealing with pressure from their institutionaland economic environments. Innovators consciously employed relevantinnovation strategies to cope with deteriorating economic conditions.Companies provided explanations regarding the external pressures(competition, resource scarcity, and customer demands) and internalorganizational decisions (gaining specific competencies, reorganizingworkflows, increasing the range and quality of services). Studying stra-tegic renewal reveals that it is important to consider systemic innova-tion that help service firms to continue to match their business skillswith environment instability and the shifting competitive landscape(Burns & Stalker, 1961). More formally,

Proposition 1a. Persistent economic decline will substantially increasethe likelihood of systemic innovation actions involving most or all domainsof service activity.

Proposition 1a is consistent with previous findings showing that, inthe case of service firms, organizational adaptation is often the resultof a reactive process prompted by environmental uncertainty or down-turn in the economy (Ettlie & Rosenthal, 2011). This study also confirmsthat firms' adaptability to changing market conditions improves whensystemic innovation actions are purposely associated with generatingorganizational renewal. Although often deemed as incremental, we ob-served that service innovationmight also be discontinuous, particularlywhen it takes place in rather unpredictable and a continuously-changing economic environment. This study suggests that services' ac-tions in a renewal situationmay trigger a distinctive portfolio of innova-tions that radically alters the focus of the firm's service-market strategy.

This process-view of innovation is especially important in advanced-knowledge providers, whose activity typically involves applying a bun-dle of capacities and competences (human, technological, organization-al) to organizing a solution to a problem (Gallouj & Weinstein, 1997).These services rely on very high levels of qualified staff to develop andsustain long-standing relationshipswith their clients. Therefore, knowl-edge intensity and a professionalized workforce have important impli-cations for the design and implementation of new-to-the-industryinnovation in advanced-knowledge services (Martin-Rios, 2016;Martin-Rios, 2014. Our study offers preliminary evidence that whenarcheological firms facing competition for scarce environmental re-sources implemented innovation actions specifically designed for eco-nomic slumps, they tended to be a departure from the establishedinnovation strategy and, as a result, might trigger major changes inthe service offering and the work methods, enabling firms to copewith changes in the external environment. We can therefore hypothe-size that:



Proposition 1b. Organizational adaptation to sustained decline in thefirm's service activity will most frequently occur in disruptive bursts of in-novation with the purpose of favoringmajor changes in the service offeringand the work methods.

For Proposition 1b not to be a tautology, disruptive innovationmust,of course, be established independent of former innovation strategy.This is consistent with earlier research on discontinuous innovationthat suggested that occasionally ‘the rules of the game’ change andfirms must change what they are doing. Kim and Pennings (2009) doc-ument that in mature industries incumbents who introduce technolog-ical innovations to strategically renew themselves have a greater chanceto successfully replace critical organizational attributes. However, mostof the research in this area has examined factors that facilitate or sup-press strategic change at manufacturing firms without examining itspertinence for services (Ndofor et al., 2013). In the case of archeologicalfirms, innovation for discontinuous transformation includes a fusion ofrelated technological and OI.

5.2. OI, resource orchestration and renewal

While researchers have noted that services benefit from innovation(Hervas-Oliver & Sempere-Ripoll, 2015), the underlying processes thatcontribute to strategic renewal are notwell understood. In archeologicalfirms attempting discontinuous strategic transformations (Agarwal &Helfat, 2009), innovation portfolios tended to undertake an integrationof technological and OI capabilities. Resource orchestration led to adap-tive efforts based on the need to promote renewal where more tradi-tional, standard innovative actions might not be enough to guaranteefirm survival. The findings suggest that those firms that engaged in sev-eral forms of innovation activities (technological and organizational)were more likely to overcome economic downturn. We argue thatfirm adaptability to changing market conditions improves when differ-ent innovation initiatives are aimed at organizational renewal. This isparticularly important in turbulent times. Indeed, during financial andeconomic crises advanced-knowledge services are forced to continuallyreadapt their strategic focus and pursue alternative markets, customer,and service opportunities. More formally,

Proposition 2a. Major declines in the economic conditions over severalyears will substantially increase the likelihood of combining technologicaland OI.

Proposition 2a is consistent with previous findings showing that in-novation reduces the risk of organizational failure; but it also confirmsthat — besides technological innovation — OI plays an essential role instrategic renewal. For knowledge-based services, advanced manage-ment systems are essential to ensure service success (Castellacci,2008) and, as we find out, OI plays a central role in the developmentof these activities. Many self-declared ‘highly innovative’ companies inthe activity put more emphasis on OI. For those firms with a clear inno-vation pathway or portfolio, OIwas intimately linkedwith renewal. Thisform of non-technological innovation helped companies to withstandthe economic downturn, financial crisis, and the exhaustion of their ser-vice business model. At the same time, it enabled and facilitated achange in business practices and encouraged servicemodel innovations.This type of innovation aimed to improve the effectiveness and perfor-mance of the firm while restructuring its strategic and organizationalfoundations. In particular, OI actions contributed to resource orchestra-tion activities in terms of efficient innovation decisions and implemen-tation. More formally,

Proposition 2b. In the context of persistent economic decline, OI has thepotential to successfully leverage strategic renewal actions.

Proposition 2b broadens the importance of OI beyond its current roleas a prerequisite or facilitator of other innovation dynamics (e.g., the in-troduction of technological innovations) (Damanpour, 1991). It

emphasizes OI as a critical process for service firms attempting renewal.To some extent, the disadvantages of a severe economic downturn canturn into innovation advantages and opportunities for pioneeringfirms (Martin-Rios & Parga, 2015). We illustrate how confronting a per-sistent economic slump, one that has seen nearly half of all companies inthe sector go under, may actually lead surviving firms to develop othercore capabilities in areas like management systems, creative problemsolving, and rule-bending.

6. Limitations and conclusion

The main limitation of this study is the lack of longitudinal financialdata to capture performance and offer ratios, such as return on invest-ment or return on equity of the firms that are successful or unsuccessfulin reversing economic crisis. From this perspective, it is necessary tocontinue gathering quantitative data in order to analyze the renewalor failure (including liquidation) dichotomy through OI. While generalconclusions drawn from a single case study require caution, the processtheory presented in this paper offers preliminary evidence that strategicrenewal actions and, specifically, OI, are an important tool for servicefirms facing hostile, declining economic conditions as it has the poten-tial to help them to obtain superior capabilities in terms of organization-al and technical efficiency.

Despite the recent surge in academic interest, service response to en-vironmental decline remains a poorly understood, under-researchedtopic, particularly in aspects pertaining to theway resource orchestrationvia innovation actions contributes to organizational adaptation and re-newal. This study suggests a complex and dynamic process of adaptationand recovery for services and supports the view that advanced-knowledge service providers must look beyond short-sight initiativesand implement innovations to overcome crises. After enjoying growththat was unparalleled in any other country, Spanish archeological firmswere rocked by the impact of the crisis and squeezed to the verge of ex-tinction. Firms had to implement innovative actions to survive. Resultsindicated that renewal was facilitated by integrating OI capabilities intoservice's renewal portfolio.

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service response to economic decline: innovation actions for achieving strategic renewal

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