Study - Optimal Distinctiveness: Broadening The Interface Between Institutional Theory And Strategic Management

Study - Optimal Distinctiveness: Broadening The Interface Between Institutional Theory And Strategic Management

Keywords: optimal distinctiveness; differentiation; conformity; legitimacy; strategic balance; institutional theory


Date: 2016



Optimal Distinctiveness

Being different enough from peer firms to be competitive, but similar enough to peers to be recognizable.

Institutional Theory

Strategic Balance Theory

We advocate for moving beyond research that has employed strategic balance theory. In particular, we believe the focus on one single, static convergence point where the legitimate distinctiveness of a firm is maximized, has been limiting. While this focus might usefully capture the main way firms seek to balance conformity versus differentiation tensions in highly institutionalized and competitive market environments, it fails to capture the variety of strategies firms might employ to achieve optimal distinctiveness, especially in more complex and dynamic markets. In such markets, stakeholders are multiplex with heterogeneous preferences, and legitimacy expectations might vary across time and space. As a result, strategic positioning cannot be simply gauged against a stable set of competitors, but needs to be adapted according to the changing criteria associated with different stakeholders, various organizational life stages, and unique trajectories of an industry’s evolution. Hence, managers must be open to appreciating how their firms might be better conceptualized as complex, multidimensional entities, and how their challenge is to align different organizational attributes to fit contextual requirements in order to be optimally distinct.

Conformity-differentiation problem


Research Summary

Attaining optimal distinctiveness—positive stakeholder perceptions about a firm’s strategic position that reconciles competing demands for differentiation and conformity—has been an important focal point for scholarship at the interface of strategic management and institutional theory. We provide a comprehensive review of this literature and situate studies on optimal distinctiveness in the broader scholarly effort to integrate institutional theory into strategic management. Our review finds that much extant research on firm-level optimal distinctiveness is grounded in the strategic balance perspective that conceptualizes conformity and competitive differentiation as a trade-off along a single organizational attribute. We argue for a renewed research agenda that draws on recent developments in institutional theory to conceptualize organizational environments as more multiplex, fragmented, and dynamic, and discuss its implications for core strategic management topics.

Managerial Summary

This article aims to provide managers with a more comprehensive and contemporary view of how firms can become optimally distinct—being different enough from peer firms to be competitive, but similar enough to peers to be recognizable. We aim to equip managers with an understanding of firms as complex, multidimensional entities, and encourage them to identify and orchestrate various types of strategic resources to reconcile conformity versus differentiation tensions, address the multiplicity of stakeholder expectations, and aptly modify their positioning strategies in order to succeed in dynamic environments.

Discussion & Conclusion

Theorizing various optimal distinctiveness points and attending to orchestrating mechanisms may allow us to build more robust organization designs. The ability to manage a portfolio of different orchestrating mechanisms is critical for firms to be effective in gaining optimal distinctiveness in the short run, and remain adaptive in the face of uncertain and evolving conditions over the long run. With the integrative and compensatory orchestrating mechanisms we posit, apparent conflicts, such as conformity versus differentiation, can be reconciled and integrated to synergistically create robust and effective organizations. Building a robust organizational design for optimal distinctiveness also requires that managers invoke prevailing dominant logics (Prahalad and Bettis, 1986), and identify the most relevant and powerful stakeholders, so as to ground orchestrating mechanisms in a particular time and space, and embed them within the set of understandings and practices that constitute the institutional environment.
As our review has highlighted, although past studies on optimal distinctiveness have wrestled with the underpinning conformity-differentiation nexus, those studies have been fragmented in theorizing what a firm is conforming to and differentiating from. They have focused on examining the balancing of a single dimension of strategy, structure, or process, and relating it to organizational performance.
Finally, we demonstrated the value of our renewed approach to optimal distinctiveness for a number of core strategic management topics. The three key dimensions of our approach: 1. Orchestration 2. Stakeholder multiplicity 3. anaging temporality have potential to stimulate new insights into effective management of various competing demands and organizational tensions, including: * Exploration versus exploitation * Innovation versus imitation. While we sketched some research questions that could guide the generation of knowledge across key strategic management topics such as organizational ambidexterity, competitive advantage, product-market scope, and market entry, we believe that the issues we raise cut across most areas of strategy. For instance, in addition to what we have discussed, we see value of our framework in helping to address debates around other important strategic issues such as: * Blending of competition and cooperation (Chen and Miller, 2015) * Impact of related versus unrelated diversification on firm performance (Grant, Jammine, and Thomas, 1988) * Financial-social performance relationship in strategy research, particularly among social enterprises (Barnett and Salomon, 2012; Battilana and Lee, 2014; Margolis and Walsh, 2003) * Identification and development of optimal growth strategies (Capron and Mitchell, 2012)