Proposal adequacy as an enabler of benefits from high distinctiveness: evidence from crowdfunding

Optimal Distinctiveness Theory posits a trade-off whereby increasing business distinctiveness enhances differentiation within a category while reducing conformity to category norms, thereby diminishing market legitimacy. Nevertheless, businesses with high distinctiveness frequently gain broad support in the market. This study introduces the concept of proposal adequacy, defined as ‘the extent to which a business fulfills the various desirable formal requirements implicitly expected by evaluators when it is proposed in a particular market.’ We consider that high proposal adequacy complements the decline in legitimacy resulting from the reduced category conformity associated with high distinctiveness, and test this proposition through statistical data analysis. Using negative binomial regression models to analyze 12,883 projects on the Japanese crowdfunding platform CAMPFIRE, we find that proposal adequacy strengthens the positive relationship between distinctiveness and performance in business categories characterized by high uncertainty of utility. These results suggest that, in certain categories, proposal adequacy complements the legitimacy associated with category conformity that is diminished by high distinctiveness, thereby facilitating the broad market acceptance of highly distinctive businesses. By introducing the concept of proposal adequacy, this study extends Optimal Distinctiveness Theory and advances our understanding of the relationship between distinctiveness and performance. From a practical perspective, the findings suggest that enhancing proposal adequacy can be a significant success factor for entrepreneurs proposing innovative businesses with high distinctiveness, particularly in categories characterized by high uncertainty of utility.