Multiple Category Memberships in Markets: An Integrative Theory and Two Empirical Tests

Abstract

This article examines the effects of market specialization on economic and social outcomes. Integrating two perspectives, we explore why products that span multiple categories suffer social and economic disadvantages. According to the audience-side perspective, audience members refer to established categories to make sense of products. Products that incorporate features from multiple categories are perceived to be poor fits with category expectations and less appealing than category specialists. The producerside view holds that spanning categories reduces one's ability to effectively target each category's audience, which decreases appeal to audience members. Rather than treating these as rival explanations, we propose that both processes matter and offer a systematic, integrated account of how penalties arise as a consequence of audience-side and producer-side processes. We analyze data from two dissimilar contexts, eBay auctions and U.S. feature-film projects, to test the central implications of our theory. Together, these tests provide support for our integrated approach and suggest that both processes contribute to the penalties associated with category spanning.