Exemplar Similarity: A Tale of Two Countervailing Mechanisms

In this study, we explore the relationship between firm positioning and performance in dual benchmark settings where audiences can evaluate firms against two distinct reference points: category prototypes and exemplars. We argue that firms benefit from exemplar similarity—positioning near category exemplars—through association with an outstanding firm. However, such benefit comes with the cost of comparison against an exceptionally high-performing firm. We also argue that the impact of exemplar similarity on a firm’s market value depends on firm typicality, i.e., its degree of similarity to category prototypes. An analysis of publicly listed U.S. firms from 1997 to 2018 provides strong support for our predictions. Our findings suggest that firms need to balance between the association benefits and comparison costs of exemplar similarity.