Coherence Within and Across Categories: The Dynamic Viability of Product Categories on Kickstarter

The Double-Edged Sword of Exemplar Similarity

“…We argue that the impact of exemplar similarity on analyst evaluations is moderated by two key characteristics of the categories they represent: coherence and distinctiveness (Lo et al 2020, Soublière et al 2022. At a high level, coherence accounts for the internal alignment of category members whereas distinctiveness accounts for the external alignment of the category relative to other categories.…”

“…We adopt the language of "screening" for the first stage where analysts determine coverage, and "assessment" for the second stage where analysts evaluate and judge firms to produce an investment recommendation. Other scholars have used terms like "categorization and valuation" (Gouvard and Durand 2023), "gaining attention and evaluation" (Hsu 2006), or "classification and valuation" (Soublière et al 2022) to highlight the distinct nature of each stage. stocks yielded an average annual abnormal gross return of 4.13 percent, while a portfolio of least recommended stocks yielded an abnormal return of -4.91 percent.…”

“…Category distinctiveness also enhances a category's viability and relevance for sensemaking and evaluation (Lo et al 2020, Janisch and Vossen 2022, Soublière et al 2022, Taeuscher et al 2022. A distinct category occupies a unique and recognizable position within the broader classification system, offering clear boundaries between other categories with minimal categorical overlap.…”

“…A category that overlaps excessively with its neighboring categories loses its distinctiveness and, consequently, its utility as an independent category. This can impact the two stages of evaluation and thus moderate the relationship between exemplar similarity and audience evaluations (Soublière et al 2022). We expect category distinctiveness to amplify the positive effect of exemplar similarity on analyst coverage, as the exemplars serve as more valuable reference points in more distinct categories.…”

“…Both stages and their outcomes have implications for a firm's stock performance (Zhang et al 2020). But because each stage is characterized by different evaluation criteria, the impact of exemplar similarity may vary across them (Soublière et al 2022). Examining the effects of exemplar similarity on each evaluation stage, therefore, allows for a comprehensive understanding of the impact of exemplar similarity on audience evaluations in complex decision-making scenarios.…”