How does innovation emerge in a service ecosystem?

To advance the study of innovation in complex settings, this study integrates the innovation, institutional theory, philosophy, and service-dominant logic literatures. Exploring the emergence of innovation and service ecosystem dynamics, researchers take an abductive approach anchored in over 4 years of case study data regarding a high technology solution in an Internet-of-Things setting. By framing innovation as a systemic process, the study reveals that (1) institutional reconciliation is an overlooked phase of innovation, (2) ideas are refined by four types of institutional reconciliation pressures (tensions, divergences, expected value, and service), and (3) innovation is influenced by plasticity in four ways (recursivity, temporality, complementarity, and continuity). Based on these findings, the authors outline a research agenda regarding four principles of innovation as a systemic process. The findings suggest that managers should nurture norms, rules, and beliefs through a systemic process that facilitates the emergence of innovation