Going beyond optimal distinctiveness: Strategic positioning for gaining an audience composition premium

Abstract

Research Summary A core question in strategy research is how firms should position themselves to gain favorable audience evaluations. Emphasizing the heterogeneity in audience predispositions, we propose that firms can gain an audience composition premium by strategically positioning themselves to gain more (less) attention from audiences with positive (negative) predispositions toward them. We argue that this approach to strategic positioning is more conducive for firms with high dispersion in their audience predispositions and that firms can increase their ability to gain an audience composition premium by engaging with audiences holding moderately diverse evaluative schemas. We employ recommender systems and topic modeling to analyze 152,312 firm‐analyst‐year observations from 1997 to 2018 and 297,931 earnings call transcripts of U.S. public firms and find strong support for our predictions. Managerial Summary A key question managers encounter is how to increase their firms' evaluations from external evaluators such as security analysts. In this study, we show that firms can increase their aggregate analyst recommendations by influencing the composition of analysts who opt to cover them and gaining evaluations from analysts who have more favorable predispositions toward them (i.e., by gaining an audience composition premium). Our findings also suggest that gaining an audience composition premium is more important for enhancing a firm's aggregate analyst recommendations when there is a higher dispersion in analyst predispositions toward the firm. To increase its ability to gain an audience composition premium, the firm should engage with analysts who exhibit a moderate degree of heterogeneity in their evaluative schemas.

Positioning for optimal distinctiveness: How firms manage competitive and institutional pressures under dynamic and complex environment

“…Some scholars take a contextual perspective and predict that market or institutional factors might produce different outcomes of the same OD strategy on firm performance. Some of the proposed market‐related influences include category heterogeneity, category density, or competition intensity (Boone et al, 2013; Haans, 2019; Zhao et al, 2018); notable institutional‐related variables include audience diversity and the source of legitimacy (Fisher et al, 2016; Majzoubi & Zhao, 2023) or how different audience expectations might build a legitimacy buffer (Taeuscher et al, 2022). But in reality, organizations often confront both competitive and institutional pressures simultaneously (Gong et al, 2021; Topaler et al, 2021), so their combinations, across their varying intensities, may determine relevant boundary conditions regarding which OD strategies exist in which circumstances.…”

The Double-Edged Sword of Exemplar Similarity

“…Analysts' evaluations occur in two stages: screening and assessment 1 (Zuckerman 1999(Zuckerman , 2017Majzoubi and Zhao 2023). In the screening stage, analysts determine which firms to cover.…”

“…Different stakeholder groups bring different theories of value (Paolella and Durand 2016), evaluating lenses (Pontikes 2012, Fisher et al 2016, and logic and expectations (Benner andRanganathan 2012, Durand andJourdan 2012) to their firm evaluations. Even within a specific audience group, such as security analysts, there is a spectrum of evaluative schemas and preferences (Hsu et al 2012, Benner and Ranganathan 2017, Falchetti et al 2022, Majzoubi and Zhao 2023. It is plausible to speculate that certain analysts, particularly those with a track record of accurate forecasts for a firm, might rely less on comparisons with an exemplar and instead develop more firm-specific evaluation models.…”