A critical pathway for conceptual innovation in the social is the construction of theoretical ideas based on empirical data. Grounded theory has become a leading approach promising the construction of novel theories. Yet grounded theory–based theoretical innovation has been scarce in part because of its commitment to let theories emerge inductively rather than imposing analytic frameworks a priori. We note, along with a long philosophical tradition, that induction does not logically lead to novel theoretical insights. Drawing from the theory of inference, meaning, and action of pragmatist philosopher Charles S. Peirce, we argue that abduction, rather than induction, should be the guiding principle of empirically based theory construction. Abduction refers to a creative inferential process aimed at producing new hypotheses and theories based on surprising research evidence. We propose that abductive analysis arises from actors’ social and intellectual positions but can be further aided by careful methodological data analysis. We outline how formal methodological steps enrich abductive analysis through the processes of revisiting, defamiliarization, and alternative casing.