Two Sides of the Same Coin: How Ambiguous Classification Affects Multiple Audiences' Evaluations

This paper questions findings indicating that when organizations are hard to classify they will suffer in terms of external evaluations. Here, I suggest this depends on the audience evaluating the organization. Audiences that are market-takers consume or evaluate goods and use market labels to find and assess organizations; for them, ambiguous labels make organizations unclear and therefore less appealing. Market-makers are interested in redefining the market structure, and as a result, this type of audience sees the same ambiguity as flexible and therefore more appealing. I tested these ideas in a longitudinal analysis of U.S. software organizations between 1990 and 2002. As predicted, organizations that claim ambiguous labels are less appealing to consumers, an audience of market-takers, but more appealing to venture capitalists, who are market-makers. Further, when labels are ambiguous, aversion to or preference for ambiguity arises from the label itself. Identifying with multiple ambiguous labels does not make an organization even less appealing to a consumer or more appealing to a venture capitalist. Finally, all types of venture capitalists are not alike in how they react to a label's ambiguity. Independent venture capitalists act as market-makers and prefer organizations with ambiguous labels, while corporate venture capitalists act as market-takers and avoid them.