SGS Brownbag - Jean-Philippe Vergne, Ivey Business School
Dazed and Confused: Unpacking the Ambivalent Effect of Category Straddling on Audience Appeal among Blockchain Ventures
Wednesday 18 December 2019 (12h00 - 13h30) - Extranef - 109
An organization’s simultaneous associations with multiple social partitions (or “categories”) typically leads to decreased attention from key audiences, creating confusion or the perception that the producer lacks sufficient expertise in any one domain, and often resulting in lower social and economic evaluations. Empirical findings regarding the negative effect of “category straddling” have been mixed: of more than 90 studies, less than half reported a negative effect and more than a third reported a positive effect. After reviewing extant discussions of this conflicting pattern, we distinguish between third-party category straddling (association with multiple categories assigned by third parties external to the organization) and self-proclaimed category straddling (association with multiple categories claimed by the focal producer). We then empirically disentangle, for the first time, the respective effects of both types of straddling on audience appeal by studying funders’ investment decisions on 2,688 new venture proposals in the blockchain space between 2015 and 2018. We find a negative (“confusing”) effect for third-party category straddling and an inverted U-shaped (“dazing”) effect for self-proclaimed category straddling, such that fundraising is optimized when a new venture is deemed to be very focused by third parties despite claims by its cofounders that the venture is in fact (moderately) unfocused. To explain this finding, we propose a novel theoretical mechanism based on the notion that self-proclaimed categories constitute more accurate, less constraining descriptions of the producer than third-party categories, up to a point of information overload. Furthermore, we draw practical implications for entrepreneurs seeking to raise funding.
Déborah Philippe, Jean-Philippe Bonardi