There is an emerging consensus that the kind of theory building in Grounded Theory is based on abduction rather than induction. In particular, induction consists of making a generalization from repeated observations, but it cannot introduce any new insight; instead, it simply asserts that the pattern observed is more general. The problem with induction is sometime demonstrated to in terms of black and white swans: every swan I have every seen is white, hence all swans are white. But it only takes one black swan to "disprove" this theory (and Australia happens to be full of black swans).

Manzoor Hussain is correct that most people just treat induction as a label for moving from observations to theory, and this undoubtedly what Glaser and Strauss meant when they emphasized it in the Discovery of Grounded Theory. In essence, they wanted a label to contrast with deduction, and induction was the most widely known alternative.

As a third alternative, abduction proposes a new idea that would account for what one has observed so far, and then proceeds to test whether that would indeed work as an theory. As such, it is not a strict form of logic, but rather a mode of explanation.

Reichertz, Jo (2007). Abduction: The logic of discovery in grounded theory. In Antony Bryant & Kathy Charmaz (Eds.), The Sage handbook of grounded theory(pp. 214-228). London: Sage.

Reichertz, Jo (2010). Abduction: The logic of discovery of grounded theory [39 paragraphs]. Forum Qualitative Sozialforschung / Forum: Qualitative Social Research,11, Art. 13. Available at http://nbn-resolving.de/urn:nbn:de:0114-fqs1001135.

Strübing, Jörg (2007). Research as pragmatic problem-solving: The pragmatist roots of empirically-grounded theorizing. In Antony Bryant & Kathy Charmaz (Eds.), The Sage handbook of grounded theory(pp. 580-602). Thousand Oaks, CA: Sage.

here's a couple of readings you might find helpful

Article Theory building in qualitative research: reconsidering the p...

Article Theory Building Through Conceptual Methods

https://journals.sagepub.com/doi/abs/10.1177/1523422302043008?journalCode=adha

Ashfaque - The most common inductive qualitative method of theory building in social sciences are: 1) phenomenology 2) ethnography 3) grounded theory and 4) case study. However, theory building in social sciences involve both Inductive and deductive reasoning and both strive to construct a valid argument. Inductive reasoning moves from specific instances into a generalized conclusion, while deductive reasoning moves from generalized principles that are known to be true to a true and specific conclusion. Inductive research involves the conversion of raw, qualitative data into more useful quantitative data and does not involve the testing of pre-conceived hypotheses, instead allowing the theory to emerge from the content of the raw data. The main difference between inductive and deductive approaches is that the deductive approach is aimed and testing theory, an inductive approach is concerned with the generation of new theory emerging from the data. A deductive approach usually begins with a hypothesis, whilst an inductive approach will usually use research questions to narrow the scope of the study. Inductive approaches are generally associated with qualitative research, whilst deductive approaches are more commonly associated with quantitative research.

There is an emerging consensus that the kind of theory building in Grounded Theory is based on abduction rather than induction. In particular, induction consists of making a generalization from repeated observations, but it cannot introduce any new insight; instead, it simply asserts that the pattern observed is more general. The problem with induction is sometime demonstrated to in terms of black and white swans: every swan I have every seen is white, hence all swans are white. But it only takes one black swan to "disprove" this theory (and Australia happens to be full of black swans).

Manzoor Hussain is correct that most people just treat induction as a label for moving from observations to theory, and this undoubtedly what Glaser and Strauss meant when they emphasized it in the Discovery of Grounded Theory. In essence, they wanted a label to contrast with deduction, and induction was the most widely known alternative.

As a third alternative, abduction proposes a new idea that would account for what one has observed so far, and then proceeds to test whether that would indeed work as an theory. As such, it is not a strict form of logic, but rather a mode of explanation.

Reichertz, Jo (2007). Abduction: The logic of discovery in grounded theory. In Antony Bryant & Kathy Charmaz (Eds.), The Sage handbook of grounded theory(pp. 214-228). London: Sage.

Reichertz, Jo (2010). Abduction: The logic of discovery of grounded theory [39 paragraphs]. Forum Qualitative Sozialforschung / Forum: Qualitative Social Research,11, Art. 13. Available at http://nbn-resolving.de/urn:nbn:de:0114-fqs1001135.

Strübing, Jörg (2007). Research as pragmatic problem-solving: The pragmatist roots of empirically-grounded theorizing. In Antony Bryant & Kathy Charmaz (Eds.), The Sage handbook of grounded theory(pp. 580-602). Thousand Oaks, CA: Sage.

Dear Dr. Manzoor,

Thank you for your reply. It was really helpful. I need further understanding with your help. Would you please recommend any good research paper as an example, as you mentioned: conversion of raw, qualitative data into more useful quantitative data and does not involve the testing of pre-conceived hypotheses, instead allowing the theory to emerge from the content of the raw data.

Second: In theory building, existing theories are also modified. Do we use deductive approaches in this case? Thank you Dr Manzoor Hussain

Dear Dr. Morgan,

Thank you for your reply. It took me some time to understand the replies of both of you which further arose new questions. Like as you mentioned in your reply that there is a growing consensus that theory building in Grounded Theory is based on abduction rather than induction because abduction accounts for what one has observed so far, and then proceeds to test whether that would indeed work as an theory. But how it is different from induction, dont we have a similar approach in induction?

You also mentioned that induction cannot introduce new insight while abduction proposes a new idea. How does it happen when the two approaches are based on observations.

Thank you David L Morgan

Induction projects past observations into the future, whereas abduction provides a prediction that can be tested more broadly, not just through repeated observations of the same thing. "If my abductive assumption is indeed the case, then I should also observe X, and Y, and Z."

The reason induction does not produce new knowledge is that it simply assumes what has already been observed will continue to be observed, whereas abduction generates an account for why observations are the way they are, so it requires a new idea.

Try HS Becker, Tricks of the Trade.

Thank you David L Morgan , I further studied Abduction reasoning and found that Abduction depends on incomplete set of observations but it involves creativity, intuition or even revolutionary while drawing conclusion. The best example is the work of Einstein which was neither inductive nor deductive, but involved a creative leap of imagination and visualization that scarcely seemed warranted by the mere observation. In fact, so much of Einstein's work was done as a "thought experiment" that some of his peers discredited it as too fanciful.