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

Abstract

Research SummaryHow firms strategically balance legitimacy and distinctiveness has garnered significant attention but reflects inconsistent perspectives. This inconsistency may stem from the inherent complexity of optimal distinctiveness (OD), which are sensitive to both the context and temporality. This article explores dynamic changes in institutional and competitive pressures and how they co‐evolve with different OD strategies. Through an exploratory, multi‐case study, we propose a pressure‐response model to uncover how firms dynamically pursue OD in response to different combinations of pressures. Furthermore, our findings reveal the mechanisms that drive the dynamic interactions between distinctiveness and legitimacy across different OD strategies. In essence, this study contributes to the OD research agenda by providing insights into the evolution of OD strategies, addressing the how and why behind their development.Managerial SummaryCan enterprises effectively balance their needs for legitimacy and distinctiveness by achieving an optimal level of similarity and differentiation from their competitors? This article demonstrates that, in the face of multiple pressures with varying intensities, enterprises continuously adapt their strategic choices to achieve optimal distinctiveness (OD). As institutional and competitive pressures gradually intensify, an enterprise's OD strategies may transition from isomorphic and balancing approaches toward deviation. However, when accumulated inertia hinders the enterprise's ability to respond to emerging pressures, adjustments to the OD strategy may become necessary. Therefore, this study offers entrepreneurs a practical guide on how to dynamically maintain their enterprise's OD by selecting appropriate strategies based on the specific circumstances at hand.

How does strategic deviation affect firm performance? The roles of financing constraints and institutional investors

“…(2022a, b) that distinguishing types of success can reconcile tensions in discussions about firms’ behavioral choices. By elucidating the favorable effect of SD on market performance and the detrimental impact of SD on financial performance, this research reconciles the contradictory results in previous studies (Deephouse, 1999; Su et al. , 2024; Dimaggio and Powell, 1983) and helps to form a better understanding of the intrinsic relationship between a firm’s strategic choices and short-term financial performance as well as long-term market performance.…”

“…, 2024; Dimaggio and Powell, 1983) and helps to form a better understanding of the intrinsic relationship between a firm’s strategic choices and short-term financial performance as well as long-term market performance. Through dialogue with the literature of institutional theorists and strategy scholars, it enriches the literature on the economic consequences of the SD, avoiding the trap of pursuing optimal performance and allowing for a more comprehensive assessment of firm performance (Su et al. , 2024; Zhao et al.…”

“…Individuals can establish their own skill expertise and proprietary knowledge in specific fields to enhance their competitiveness in the labor market (Singh et al, 2022). For firms, maintaining proper strategic deviation (SD)which reflects the degree to which their strategies deviate from industry peersmay increase the ability to gain competitive resources and excess returns (Deephouse, 1999;Su et al, 2024). However, the SD also brings challenges.…”

“…Thus, the paradox of the SD and strategic convergence has become a core issue in the field of management and has given rise to three types of explanations (Su et al. , 2024).…”

“…Thus, the paradox of the SD and strategic convergence has become a core issue in the field of management and has given rise to three types of explanations (Su et al, 2024). First, the balanced view asserts that there exists an inverted U-shaped relationship between the SD and firm performance, indicating that organizations should seek moderate levels of deviation to obtain optimal performance (Deephouse, 1999;McNamara et al, 2003).…”