With whom to be distinctive? Examining the impact of innovation narrative distinctiveness from the category prototype vs. category exemplar on firm performance

Managing the tension between innovation distinctiveness and conformity to achieve optimal distinctiveness is a pivotal strategic concern for high-tech firms. This study analyzes innovation text data from 561 high-tech firms across eight industrial categories, examining how a firm's innovation positioning relative to category exemplars and prototypes influences audience evaluations and subsequently affects firm performance. The findings indicate that (1) innovation narratives that deviate from the category prototype positively impact firm performance through favorable evaluations from investors and government. (2) In contrast, innovation narratives that deviate from category exemplars generally result in negative investor evaluations, which adversely affect firm performance, however, these deviations are associated with positive government evaluations and perceptions, which paradoxically do not translate into improved firm performance. By highlighting the complex role of innovation narrative positioning across different benchmark in shaping audience evaluations, our findings contribute significant insights to research on category positioning, optimal distinctiveness, and audience evaluation.