What's the value of being different when everyone is? The effects of distinctiveness on performance in homogeneous versus heterogeneous categories

Research Summary Is moderate distinctiveness optimal for performance? Answers to this question have been mixed, with both inverted U and U‐shaped relationships being argued for and found in the literature. I show how nearly identical mechanisms driving the distinctiveness‐performance relationship can yield both U‐shaped and inverted U‐shaped effects due to differences in relative strength, rather than their countervailing nature. Incorporating distinctiveness heterogeneity, I theorize a U‐shaped effect in homogeneous categories that flattens into an inverted U in heterogeneous categories. Results combining a topic model of 69,188 organizational websites with survey data from 2,279 participants in the Dutch creative industries show a U‐shaped effect in homogeneous categories, flattening and then disappearing in more heterogeneous categories. How distinctiveness affects performance thus depends entirely on how distinct others are. Managerial Summary A core strategy recommendation is to be different from competitors. Recent work highlights the notion of optimal distinctiveness—being different enough to escape competition yet similar enough to be legitimate, thus yielding the highest performance. This article challenges the notion that one “optimal” level of distinctiveness exists and focuses on distinctiveness heterogeneity (representing variation in firm positions in a category) as a key contextual factor. Results from a sample of firms in the Dutch creative industries show that either being entirely different or entirely the same to competitors pays off when one's category is very homogeneous. However, being different loses its performance effects entirely when heterogeneity in firm positions is higher. Being different from competitors, therefore, no longer pays when others tend to be different, too.