Abstract
AbstractResearch summaryOptimal distinctiveness theory highlights that firms need to balance opposing pressures for differentiation (to gain competitive benefits) and conformity (to gain legitimacy). Yet, extant optimal distinctiveness research rarely considers that the pressure for conformity can substantially vary between competing firms. Studying the positioning and growth performance of competing platforms in the market for Massive Open Online Courses (MOOCs), we find that platforms' access to high‐status complementors—a common source of legitimacy in platform markets—substantially shapes the relationship between platforms' distinctiveness and user growth. Our longitudinal models show that platforms only benefit from a (moderately) distinctive positioning once they have buffered a certain amount of legitimacy. Our findings strongly suggest that firms can alleviate conformity pressures by accessing alternative sources of legitimacy.Managerial summaryWhen does differentiation pay off? We study this question in the increasingly important context of platform markets to explain differences in platforms' user growth. Our longitudinal study of competition in the market for Massive Open Online Courses (MOOCs)—in which platforms like Coursera and Udacity compete for online learners as users—shows that the performance implications of a distinctive positioning substantially depend on the legitimacy that a platform has gained from attracting high‐status organizations as complementors. Platforms only benefit from differentiation once they surpass a certain legitimacy threshold, and the legitimacy they gain beyond this threshold accelerates the benefits of a (moderately) distinctive positioning.
Highlights
When and to which degree should firms differentiate their strategic positions? Differentiated positions can create both benefits and liabilities because they reduce competitive pressure (Porter, 1980, 1985) but can indicate a lack of conformity and may threaten the firm's legitimacy (Deephouse, 1999)
We confirmed that the presented relationships do not change if we exclude Platform age and/or Number of Massive Open Online Courses (MOOCs) platforms from our models
Optimal distinctiveness research highlights the tension between differentiation and conformity, suggesting that an “optimal” level of distinctiveness exists, at which firms can balance the competitive benefits of distinctiveness against the loss of legitimacy that results from non-conformity
Summary
When and to which degree should firms differentiate their strategic positions? Differentiated positions can create both benefits and liabilities because they reduce competitive pressure (Porter, 1980, 1985) but can indicate a lack of conformity and may threaten the firm's legitimacy (Deephouse, 1999). Recent optimal distinctiveness research started to challenge the assumption that there exists a stable level of optimal distinctiveness (Barlow, Verhaal, & Angus, 2019; Haans, 2019; Zhao, Ishihara, Jennings, & Lounsbury, 2018) This line of research suggests that the relative benefits (reduced competition) and liabilities (reduced legitimacy due to insufficient conformity) of distinctiveness can systematically differ between market categories (Haans, 2019) and may change over time as a market category becomes more institutionalized and crowded (Zhao et al, 2018). The degree to which a firm can tap into other sources of legitimacy (i.e., apart from conformity) will determine the firm's pressure for conformity and should determine the extent to which distinctiveness will reduce legitimacy This oversight matters because what constitutes an optimally distinctive position for one firm may result in poor performance outcomes for other firms in the same market
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