Conformity or Differentiation: Optimal distinctiveness through mediating channels

The ongoing discourse on optimal distinctiveness surrounding the tradeoff between conformity and differentiation for achieving legitimacy prompts a crucial question: while conformity is known to legitimate, can the converse—differentiation—also confer legitimacy? We propose that new ventures possess the strategic flexibility to choose names conveying conformity or differentiation, enabling them to be perceived as legitimate. Expanding existing paradigms that suggest a tradeoff between the two constructs, we advance a harmonious rather than dissonant role of conformity and differentiation, suggesting that both can lead to legitimacy. More specifically, we expand the theory of optimal distinctiveness by developing a model that elucidates the cognitive processes that culminate in legitimacy perceptions. We then empirically test this model by undertaking an examination of new venture names. The theoretical contribution in this study lies in identifying the mediating mechanisms which explain the relationships between conformity and differentiation and legitimacy perceptions.