Optimal Distinctiveness in the Console Video Game Industry: An Exemplar-Based Model of Proto-Category Evolution

In this paper, we develop an exemplar-based model of the emergence and evolution of proto-categories—new groupings of products that are only weakly entrenched but have the potential to become widely institutionalized—and examine how different positioning strategies of new entrants vis-à-vis the exemplar of a proto-category affect entrant performance. Empirically, we study the U.S. console video game industry where proto-categories frequently emerge and evolve around exemplary hit games. Analyzing a proprietary database of 6,544 games comprising 78 such proto-categories, we find that, in the early stages of proto-category emergence, conformity with the exemplar’s features is positively associated with new entrants’ sales. As a proto-category evolves, a moderate level of differentiation becomes important for enhancing sales. We also find that this temporal dynamic is driven by the changing competitive intensity in the proto-category and strongly mediated by critics’ reviews. Moreover, the mediating effect of critics’ reviews on entrant sales becomes increasingly salient with the evolution of a proto-category. Finally, we show that accounting for the influence of emerging prototypes does not diminish the explanatory power of the exemplar model we propose. We conclude the paper by discussing the implications of our findings for research on categorization and optimal distinctiveness.