LAUSR

Abstract Extant literature focuses primarily on deliberate, proactive market-shaping efforts to understand changes in markets. This paper explores how emergent, incremental activities might unintentionally prompt market innovation due to the interactions of capability development and its required institutional work. Using a critical case method, we study a firm that successfully challenged established market logic by systematically changing its capabilities. A longitudinal field study reveals that capability development demands induce changes to institutional foundations; then, as institutions change, further capabilities can be developed, all of which may instigate wider market innovation outcomes. This study conceptualizes this intricate, iterative process, as well as its evolutionary market innovation outcomes. The proposed three-level capability model can guide firms striving to offer new and innovative services. The authors also detail a three-stage research design methodology that can help research and practice gain in-depth understanding of both emergent unintentional market innovation and strategic deliberate market-shaping activities.