The theory of strategic balance argues that organizations that are neither too similar to nor too distinct from their rivals will be best positioned to meet competing demands for legitimacy and competition. This is because a similar identity to other organizations signals conformity, thus generating legitimacy, while adopting a distinctive identity through differentiation provides competitive advantage. Recent studies have noted that various combinations of conformity and differentiation tactics can achieve “optimal distinctiveness,” which, depending on the particular competitive landscape, may be low, moderate, or high. This study disentangles the effect of distinctiveness in a landscape from the effects of conformity to and differentiation from ancestral identities that serve as templates for new identities. Taking a configurational approach, we explore whether distinctiveness, proximity to an ancestral identity, hybridization of multiple ancestral identities, and vertical or horizontal differentiation are necessary or sufficient, alone or in combination, to generate appeal for new identities.
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