UCL School of Management is delighted to welcome Jean-Philippe Vergne, Western University, to host a research seminar discussing ‘Dazed and confused: Unpacking the ambivalent effect of category straddling on audience appeal among blockchain ventures’

Abstract

An organization’s simultaneous associations with multiple social partitions (or “categories”) typically leads to decreased attention from key audiences, creating confusion or the perception that the producer lacks sufficient expertise in any one domain, and often resulting in lower social and economic evaluations. Empirical findings regarding the negative effect of “category straddling” have been mixed: of more than 90 studies, less than half reported a negative effect and more than a third reported a positive effect. After reviewing extant discussions of this conflicting pattern, we distinguish between third-party category straddling (association with multiple categories assigned by external audiences) and self-proclaimed category straddling (association with multiple categories claimed by the focal producer). We then empirically disentangle, for the first time, the respective effects of both types of straddling on audience appeal by studying funders’ investment decisions on 2,688 new venture proposals in the blockchain space between 2015 and 2018. We find a negative (“confusing”) effect for third-party category straddling and an inverted U-shaped (“dazing”) effect for self-proclaimed category straddling, such that fundraising is optimized when new ventures do not straddle third-party categories but instead straddle a mid-range number of self-proclaimed categories. To explain this finding, we propose a theoretical mechanism that is based on the notion that self-proclaimed categories constitute more accurate, less constraining descriptions of the producer than third-party categories. Furthermore, we draw practical implications for entrepreneurs seeking to raise funding.