Optimal distinctiveness in platform markets: Leveraging complementors as legitimacy buffers

Abstract

Research summary: Optimal distinctiveness theory highlights that firms need to balance opposing pressures for differentiation (to gain competitive benefits) and conformity (to gain legitimacy). Yet, extant optimal distinctiveness research rarely considers that the pressure for conformity can substantially vary between competing firms. Studying the positioning and growth performance of competing platforms in the market for Massive Open Online Courses (MOOCs), we find that platforms' access to high-status complementors—a common source of legitimacy in platform markets—substantially shapes the relationship between platforms' distinctiveness and user growth. Our longitudinal models show that platforms only benefit from a (moderately) distinctive positioning once they have buffered a certain amount of legitimacy. Our findings strongly suggest that firms can alleviate conformity pressures by accessing alternative sources of legitimacy. Managerial summary: When does differentiation pay off? We study this question in the increasingly important context of platform markets to explain differences in platforms' user growth. Our longitudinal study of competition in the market for Massive Open Online Courses (MOOCs)—in which platforms like Coursera and Udacity compete for online learners as users—shows that the performance implications of a distinctive positioning substantially depend on the legitimacy that a platform has gained from attracting high-status organizations as complementors. Platforms only benefit from differentiation once they surpass a certain legitimacy threshold, and the legitimacy they gain beyond this threshold accelerates the benefits of a (moderately) distinctive positioning.