Problem: Today’s rapid globalization along with technological improvements force organizations to adapt its strategy to external changes. Companies may undertake strategic renewal in order to cope with these changes (Agarwal & Helfat, 2009). However, there are forces that somehow interrupt a firm’s ability to adapt, which are called strategic inertia (Mallette & Hopkins, 2013). The forces of strategic renewal and strategic inertia do not exist independently from one another rather they coexist and vary in its influence on the company (Melin, 1998). The previous research exploring Strategic Renewal and Strategic Inertia as two co-existing forces appears to be limited, which creates an incentive to explore the phenomena in an innovative company setting.

Purpose: The purpose of this thesis is to explore the existence of the phenomena of strategic renewal and strategic inertia in an innovative firm.

Method: In order to fulfill the aim of this research, a qualitative case study was undertaken. The primary data was gathered through interviews with managers from different departments at the company Fagerhult Lighting AB.

Conclusion: This research contributes to the academic field of strategy as it proposes six circumstances that foster strategic renewal and strategic inertia in an innovative firm. The circumstances are clarified in the following six propositions, where (1) the encouragement of new ideas, (2) employees that are open to change, and (3) the acquiring of people with different perspectives and backgrounds, are presented as drivers for strategic renewal, while (4) prioritization of resources, (5) differences in interests and attitudes and (6) insufficient understanding and engagement, are sources for strategic inertia. The conclusion of this research is that strategic renewal and strategic inertia can co-exist within an innovative firm.