Anchored Differentiation: The Role of Temporal Distance in the Comparison and Evaluation of New Pro

Abstract

A new design can be compared with its contemporaries or older designs. In this study, we argue that the temporal distance between the new design and its comparison play an important role in understanding how a new design’s similarity with other designs contributes to its market valuation. Construing the value of designs as a combination of their informational value and their expressive value, we propose the anchored differentiation hypothesis. Specifically, we argue that the market audience weighs the expressive value (which enhances with how much the new design appears different from others) more than the informational value (which enhances with how much the new design appears similar to others) when the comparison is made to contemporary designs. However, the market weighs informational value more than expressive value when the comparison is made against designs from the past. From a data set that combines US design patents and stock market reactions in the days subsequent to such a patent being granted, we explore how a new design’s degree of similarity vis-à-vis contemporaries or predecessors affect its market value. We find that the market value for a new design decreases with its similarities to contemporary new designs (contemporary differentiation) but increases with its similarities to prior designs (past anchoring). Furthermore, we find that the value of contemporary differentiation is enhanced with increased product visibility, whereas the value of past anchoring is enhanced with increased product technological lifespan. Hence, we contribute to the growing literature on optimal distinctiveness and design innovation by offering a dynamic perspective that helps resolve the tension between similarities and differences in evaluating new designs.