HEC Research Papers Series,
HEC Paris

Abstract: Organizations need to both differentiate themselves while conforming to their audiences’ expectations. To meet this demand, organizations may span different categories. However, valuing spanners is challenging for audiences. We contend that spanners’ valuation depends on category nesting, as the congruence of informational cues varies between basic categories and subcategories. Furthermore, we expect that more expert audiences find spanners to be more congruent (and hence, more valuable) at a subordinate level than at a basic level of categorization. We test our hypotheses using a mixed methods design in the context of venture capital investments. We analyze observational data on more than 29,000 venture capital deals and develop two experimental studies. Our findings support our hypotheses that subcategory-spanning lowers valuation, and that this effect is attenuated as investors’ expertise increases. Our experimental studies further show that congruence is a causal mechanism explaining these effects. Our findings have important implications for research on organizational conformity and optimal distinctiveness, categorization in markets from an information processing perspective, and the impact of expertise on valuation.

Keywords: categories; expertise; venture capital; experimental methods

JEL-codes: L00

60 pages, January 14, 2022

Full text files

papers.cfm?abstract_id=4008043 HTML file Full text

Download statistics

• HEC Paris
• Ordering Working Papers
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Antoine Haldemann ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:ebg:heccah:1451This page generated on 2024-09-13 22:19:53.