Finding the threshold: A configurational approach to optimal distinctiveness

How can new ventures successfully distinguish themselves from competitors and incumbents while also ensuring that the new venture is seen as legitimate and appropriate? This tension is challenging. If a new venture is not seen as legitimate, usually by conforming to typical models of firms in its category, it will struggle to access resources, attract customers, satisfy regulators and curry favor from other stakeholders. This makes commercialization challenging. At the same time, entrepreneurs must convince customers, investors, and suppliers that their nascent firm is offering something new and valuable. This is the challenge of optimal distinctiveness: how different can and should firms be? Prior research addressing the challenge of optimal distinctiveness has suggested that firms strike a strategic balance between conformity for legitimation and competitive differentiation, and also that firms should be as different as legitimately possible. While similar, there is ambiguity in these prescriptions. Should firms perfectly balance legitimacy and differentiation, or aggressively differentiate themselves beyond a base level of legitimacy? How to achieve optimal distinctiveness remains unclear. Clouding matters further, how a firm seeks legitimation and pursues differentiation is contextual depending on industry, technology stage, constituents and other factors. This means that the path to optimal distinctiveness likely demonstrates equifinality. We adopt a configurational approach, exploring optimal distinctiveness in the context of newly commercializing Canadian clean technology firms. We consider how firms use differentiating framing and collaboration strategies in the context of radical technology, incumbent dependency, relevant entrepreneurial experience, and presence in international markets. Rather than assuming a singular point of optimal distinctiveness, we explore how different combinations of strategies and conditions can lead to successful commercialization. Methodologically, we adopt an exploratory qualitative comparative analysis (QCA) approach. Our study elaborates theory on optimal distinctiveness by developing the notion of a legitimacy threshold. We argue that successfully commercializing firms are those that seek levels of differentiation that go beyond merely striking a strategic balance. In the process we identify combinations of strategies and contextual conditions associated with successful commercialization as well as non-commercialization.