granqvist et al. 2014

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Hedging Your Bets: Explaining Executives' Market LabelingStrategies in NanotechnologyNina Granqvist, Stine Grodal, Jennifer L. Woolley,

To cite this article:Nina Granqvist, Stine Grodal, Jennifer L. Woolley, (2013) Hedging Your Bets: Explaining Executives' Market Labeling Strategiesin Nanotechnology. Organization Science 24(2):395-413. http://dx.doi.org/10.1287/orsc.1120.0748

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OrganizationScienceVol. 24, No. 2, MarchApril 2013, pp. 395413ISSN 1047-7039 (print) ISSN 1526-5455 (online) http://dx.doi.org/10.1287/orsc.1120.0748

2013 INFORMS

Hedging Your Bets: Explaining ExecutivesMarket Labeling Strategies in Nanotechnology

Nina GranqvistAalto University School of Economics, FI-00076 Aalto, Helsinki, Finland, [email protected]

Stine GrodalBoston University School of Management, Boston, Massachusetts 02215, [email protected]

Jennifer L. WoolleyLeavey School of Business, Santa Clara University, Santa Clara, California 95053, [email protected]

Executives use market labels to position their firms within market categories. Yet this activity has been given scarceattention in the extant literature that widely assumes that market labels are simple, prescribed classification brackets thataccurately represent firms characteristics. By examining how and why executives use the nanotechnology label, we uncoverthree strategies: claiming, disassociating, and hedging. Comparing these strategies to firms technological capabilities, wefind that capabilities alone do not explain executives label use. Instead, the data show that these strategies are driven byexecutives aspiration to symbolically influence their firms market categorization. In particular, executives perception ofthe labels ambiguity, their avoidance of perceived credibility gaps, and their assessment of the labels signaling value shapetheir labeling strategies. In contrast to extant research, which suggests that executives should aim for coherence, we findthat many executives hedge their affiliation with a nascent market label. Thus, our study shows that in ambiguous contexts,noncommitment to a market category may be a particularly prevalent strategy.

Key words : labels; nascent technology; ambiguous contexts; executives; symbolic management; market categorization;symbolic resources; claiming; disassociating; hedging

History : Published online in Articles in Advance May 23, 2012.

IntroductionAll executives face decisions about how to representtheir firms (Pfeffer and Salancik 1978, Ashforth andGibbs 1990). Given the ubiquity of this challenge,symbolic management scholars have shown that exec-utives adopt and manipulate symbols in attempts toshape stakeholders perceptions of their firms (Dut-ton and Dukerich 1991, Elsbach 1994). Executivesengage in symbolic management to acquire materialresources (Ashforth and Gibbs 1990), build legitimacy(Glynn and Abzug 2002), implement strategies (Fissand Zajac 2006), and generate affiliations among orga-nizations (Zajac and Westphal 1995). Symbolic manage-ment is particularly relevant in nascent markets, wherefirms actions, such as signaling efficiency, organiza-tional skills, and good stakeholder relationships, facili-tate resource acquisition (Zott and Huy 2007). Studiesshow that firms may gain beneficial market positionsby conveying leadership or a unique identity throughdisseminating stories about the nascent market (Louns-bury and Glynn 2001, Santos and Eisenhardt 2009;also see Kennedy 2008) or selecting suitable companynames (Lee 2001, Glynn and Abzug 2002, Glynn andMarquis 2004). Yet despite research on the outcomesand practices of symbolic management, studies pay

scarce attention to how executives manage one of themost fundamental issues a firm faces: its membership ina market category.

Categories play a key role in organizing markets (Rosaet al. 1999). The market categorization literature sug-gests that the way in which stakeholders perceive firmscategorical membership is crucial to the firms perfor-mance and governance (Zuckerman 1999, 2000; Hsu2006), the construction of rivalry among them (Poracet al. 1995), and the emergence of nascent markets(Rosa et al. 1999, Plos et al. 2002, Garud et al. 2010).Membership in a market category is often establishedthrough a market label that stakeholders assign to a firm(e.g., Porac et al. 1995, Hannan et al. 2007). A marketlabel is a type of symbol used to signify membershipin a particular market category. Common examples ofmarket labels include biotechnology, healthcare, andconstruction, each of which conveys different expecta-tions for a firm affiliated with those labels. Market labelshence create shared reference points that influence howstakeholders conceive of and act toward an organization(Zuckerman 1999, Hannan et al. 2007).

Overall, our knowledge of market labels remainsunderdeveloped, and existing literature provides contra-dictory arguments. The symbolic management literature

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suggests that executives actively manage their firmscategorical affiliations (e.g., Ashforth and Gibbs 1990,Glynn and Abzug 2002), whereas studies on marketcategorization assume that firms operate in stable mar-ket contexts where stakeholders assign labels based ona firms actual capabilities (e.g., Porac et al. 1995,Hannan et al. 2007). The market categorization litera-ture also emphasizes the detrimental effect of member-ship in multiple categories, as this conveys confusingsignals to stakeholders about a firms characteristics(Zuckerman 1999, Plos et al. 2002, Hsu 2006, Hannanet al. 2007). In contrast, research in symbolic man-agement suggests that balancing the demands of mul-tiple stakeholders simultaneously may provide firmswith strategic flexibility (Oliver 1991, Fiss and Zajac2006). These incongruities suggest that executives facea conundrum about how to use market labelsa chal-lenge that is heightened in nascent markets where cat-egories are under construction. In such contexts, ambi-guity impedes assessment by market participants ofa labels categorical reference and firms technologi-cal capabilities (Alvesson 1990, Santos and Eisenhardt2009). Thus, both consistency and strategic flexibilitymay be advantageous in ambiguous contexts. We there-fore set out to investigate (1) how executives use mar-ket labels to signal membership in nascent market cate-gories and (2) why they use particular market labelingstrategies.

We focus on nanotechnology, a context in which theuse of market labels is highly salient to executives.Nanotechnology is a nascent market, as the technologyis emerging and few dedicated products exist. Simultane-ously, the meaning of the market label nanotechnologyis under construction, and executives rely on weak cueswhen deciding on its use (Berube 2006). However, manyexecutives are explicitly staking their firms future onthe assumption that the market will grow dramaticallyin coming years.

Our research contributes in multiple ways to under-standing how and why executives use nascent mar-ket labels. This study bridges symbolic managementliterature that overlooks the importance of strategi-cally managing market categories and market catego-rization research that assumes that labels are prescribed,accurate classification brackets by showing that exec-utives actively manage their firms perceived categori-cal membership. Specifically, we identify three labelingstrategiesclaiming, disassociating, and hedgingandshow how executives employ them to signal their firmsmarket category membership. When comparing thesestrategies with firm capabilities, we find that capabili-ties alone do not explain executives actions. Not onlydo executives in firms without the necessary capabili-ties affiliate their firms with the label, but we also findthat many executives choose to actively distance their

firms from the label even if they possess such capa-bilities. Departing from existing studies, we find thatmany executives hedge their bets; that is, they span cat-egories by sometimes using and at other times disas-sociating themselves from the label, regardless of theirfirms capabilities. In particular, executives hedge whena market label is perceived as ambiguous or creatingcredibility gaps. By identifying the labeling strategiesand the executives perceptions that influence their useof these strategies, we show that market labels are notbinary constructs that simply indicate a firms actualcharacteristics. Our study thus establishes that organiza-tional scholars need to pay close attention to what labelsboth denote and connote to better understand marketcategorization.

Labels as a Symbolic Resource inNascent MarketsIn the symbolic management literature, the term sym-bol refers to a word or object that suggests or representsmeaning (Ashforth and Gibbs 1990, Zott and Huy 2007).As such, symbols mediate socially constructed meaningsthat extend beyond the intrinsic content or function ofthe word or object in question (Morgan et al. 1983).Labels are particularly important symbols because theycan cross organizational and cultural boundaries as aresult of their capacity to shape understandings throughdiscourse (Ashforth and Humphrey 1997, Phillips et al.2004). A further strength of labels as a tool for sym-bolic management is that they function as boundaryobjects (Star and Griesemer 1989, Carlile 2002, Bechky2003) by facilitating communication among disparatestakeholders (Lamont and Molnr 2002). Labels andcategories differ in that a label is a sign or symbolthat transmits certain meanings across time and place,whereas a category is a collection of objects fromwhich those meanings derive (Vygotsky 1987, Navis andGlynn 2010). Labels can cross boundaries, but the cat-egories to which they refer are constructed and mademeaningful through the labels use in local contexts(Barley 1983).

A label associates an object with a system of meaningconsisting of the labels denotation (or explicit mean-ing) and connotation (or implicit meaning) (Peirce1931). The denotations of a label are its literal cate-gorical reference, that is, the set of objects to which itrefers (Vygotsky 1987). For example, the label non-profit denotes a diverse set of organizations such asthe Bill and Melinda Gates Foundation, the United Way,and the Red Cross. These organizations form the labelscategorical referents, or in other words, the organiza-tions to which potential members of the category arecompared for similarity. The connotations of a labelare the underlying meanings that a label references(Becker 1963, Barley 1983, Petrilli and Ponzio 2005,

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Weber et al. 2008). For instance, the market labelbiotechnology may implicitly connote meanings suchas exciting, risky, and capital intensive, which arethen associated with organizations that employ the label.Market labels play an important role not only as sig-nifiers of similar firm characteristics but also as dif-ferentiators (Hsu and Hannan 2005). For instance, thebiotechnology label signals that a firm is involvedwith high technology and biological sciences, whereasthe materials label references lower technology andbasic raw supplies. Dissimilar labels tend to exag-gerate distinctions between similar entities, and sim-ilar labels tend to diminish differences between dis-similar entities (Zerubaval 1997). Two firms that havesimilar activities but are categorized under differentmarket labels (e.g., firms making biodegradable plas-tics labeled as biotechnology or materials) will be,therefore, viewed as more different than their activitiessuggest.

Nascent markets are an especially rich context forstudying market labeling activities from the perspec-tive of both executives and stakeholders. These mar-kets are characterized by an unclear meaning system(Alvesson 1990, Aldrich and Fiol 1994, Anteby 2010),resulting in ambiguous market boundaries (Santos andEisenhardt 2009), a lack of schemas and scripts aboutproducts (Hargadon and Douglas 2001, Jones et al.2012), and inadequate institutional logics to coordi-nate action (Kaplan and Tripsas 2008). Communicationis challenging because such contexts consist of sev-eral communities (Rao 1994, Lounsbury et al. 2003,OMahony and Bechky 2008) and draw from establishedbeliefs in related fields (Lamont and Molnr 2002).Therefore, multiple meanings of a nascent market labelcan coexist in separate yet overlapping social worlds(Kraatz and Block 2008), leading firms and other actorsto offer competing definitions (Fligstein 1996).

Amid this ambiguity, the executives of firms withinnascent markets face the challenge of establishing mean-ing and legitimacy for their firms activities as wellas for the emerging category (Smircich and Stubbart1985, Aldrich and Fiol 1994, Kennedy 2008). Executivesachieve this task by using language and labels strategi-cally and, at times, ambiguously to move toward theirgoals (Eisenberg 1984, Jackall 1988). For example, byusing a market label, executives explicitly denote theirfirms as belonging to a particular market category. Suchuse of labels can be either substantive or symbolic. Exec-utives substantive use of a market label aligns actualactivities, structures, and processes of firms with theirperceptions of a labels denotations and connotations.In contrast, executives symbolic use of a market labelis aspirational or opportunistic (see Ashforth and Gibbs1990) and therefore may not be aligned with firmsactual capabilities.

Market Labels as a Tool forSymbolic ManagementThe use of various symbolic resources to manage stake-holders perceptions is the central topic in the symbolicmanagement literature. Santos and Eisenhardt (2009)demonstrated that firms in nascent markets can obtainadvantageous positions by symbolically managing howstakeholders perceive their firms. In particular, theyshowed that firms that engage in claiming, demarcat-ing, and controlling practices are more successful thanfirms that do not. Other studies have found that exec-utives attempt to satisfy external demands for account-ability by aligning explanations of firm actions withsocially legitimate language, while leaving internal prac-tices untouched (Zajac and Westphal 1995, Fiss andZajac 2006, Etzion and Ferraro 2010). Similarly, Hudsonand Okhuysen (2009) suggested that organizations man-age expectations by adopting certain business practicesand avoiding those that may be stigmatized. Together,this body of research shows that executives may suc-cessfully use symbols that are decoupled from the actualcapabilities of their firms. Yet how and why executivesassociate their firms with a market category has largelybeen overlooked by symbolic management scholars.

Studies on organizational names provide insight intohow executives manage their firms market categoriza-tion (e.g., Lee 2001, Glynn and Abzug 2002, Glynnand Marquis 2004, Phillips and Kim 2009). Names cancreate an affiliation with market categories when sim-ilar firms adopt a particular type of name. For exam-ple, names containing the gen affix, like Genentech,Amgen, and Biogen, tend to be biotechnology firmsrelated to genetics. Names are, therefore, one type ofsymbolic resource that executives can use to associatetheir firms with a market label. For example, in the late1990s, firms that adopted the suffix dot-com to theirnames were evaluated as the members of the emerg-ing Internet commerce category (Lee 2001). Likewise,after the Internet bust, the dot-com label continued tosignal membership in this category, but this time, theassociation yielded negative outcomes for firms (Glynnand Marquis 2004). Phillips and Kim (2009) even foundthat naming strategies can be used deceivingly to gainbeneficial outcomes for a firm, such as entering a newbusiness segment, while downplaying any threats to thefirms identity that such a move may cause.

In contrast to symbolic management, the market cat-egorization literature addresses market labels by exam-ining the impact of perceived category membership onindustry dynamics and firm performance (Porac et al.1995; Zuckerman 1999, 2000; Hsu 2006). This literatureposits that market labels are important to the construc-tion and function of market categories (Hannan et al.2007). Specifically, stakeholders construct novel cate-gories by assigning labels to firms (Rosa et al. 1999,Rosa and Porac 2002, Hannan et al. 2007) and base their

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market labeling activities on observable features such asthe firms resource utilization, technology, geographicalproximity, and customers (Hannan et al. 2007). In gen-eral, this research assumes that the perceptions of exter-nal actors regulate how each firm is categorized throughthe identification of common, substantive features (Poracet al. 1995, McKendrick et al. 2003). Yet these studiesexamine stable contexts and overlook situations wherestakeholders lack knowledge about firms actual prod-ucts and capabilities (see Alvesson 1990) and, in turn,assume that market labels reflect firms product port-folio. This is particularly prevalent in nascent markets,where a market forms around a set of novel technolo-gies about which limited understanding exists outsidespecialized professions (Santos and Eisenhardt 2009).

Together, research in symbolic management and mar-ket categorization has yielded an array of insights intohow executives use symbols and the importance ofmarket labels and categories, respectively. Yet thesetwo literatures have rarely informed each other. Thus,symbolic management scholars have overlooked marketcategorization as a problem that needs to be symboli-cally managed, and researchers in market categorizationassume that categorical memberships are distinct andbased on actual capabilities. Further, although literatureshows that firms benefit from engaging in symbolicmanagement, it is unclear how executives determinethe extent to which their signaling should represent theactual capabilities of their firms. These literatures alsopresent contradicting strategies for managing multipleaffiliations. Market categorization literature suggests thatfirms benefit from belonging to a single market category(Zuckerman 1999, 2000) because stakeholders monitorand sanction firms for violations in label use (Plos et al.2002, Hannan et al. 2007). In contrast, symbolic man-agement studies suggest that these negative repercus-sions may be outweighed by the benefits of judiciouslabel use that signals several meanings simultaneously(Oliver 1991, Padgett and Ansell 1993). It thereforeremains unclear how and why executives use marketlabels in contexts where both the market boundaries andthe market labels meaning are uncertain and unsettled.

To address these questions, we examine executiveslabeling strategies through a grounded study of a nascentmarket. Through our analysis, we identify three labelingstrategies. When we compare these with the firms capa-bilities, the data indicate little relationship. Instead, weuncover that executives choice of a labeling strategy isdriven by their perception of the labels ambiguity, theiravoidance of perceived credibility gaps, and their assess-ment of the labels signaling value. In contrast to existingresearch, which stresses that executives aim for coher-ence rather than ambiguity (e.g., Plos et al. 2002, Han-nan et al. 2007), we show that many executives strive tospan categories by hedging their bets with multiple mar-ket labels and ambiguous labeling. Our findings show

that executives do not accept market labels as prescribedclassification brackets but that they actively manage theirfirms category membership. Most important, our find-ings explain how and why executives use nascent mar-ket labels.

MethodsSetting: The Emerging Market for NanotechnologyWe adopted a grounded, inductive approach to exam-ine executives labeling activities. The best researchsettings for building theoretical frameworks are con-texts in which the phenomenon of theoretical interestoccurs in abundance (Garfinkel 1967, Eisenhardt 1989a,Yin 2008). In such rich settings, researchers are able toobserve multiple instances of the phenomenon and extri-cate underlying mechanisms. Thus, we chose to studythe emerging market for nanotechnology because it is adomain in which the use of the market label is fraughtwith ambiguity (Berube 2006). For instance, Woolley(2007) found that of 1,682 firms listed in five nanotech-nology directories, only 298 had nanotechnology capa-bilities. We collected real-time data on how executivesmade strategic decisions about their use of the nano-technology label (henceforth referred to as nano-label).This approach minimized retrospective bias, which isparticularly important when a study addresses thoughtprocesses and opinion formation, because these can beinfluenced and reconstructed to fit subsequent under-standing (Lofland and Lofland 1995).

Nanotechnology has garnered considerable attentionfrom governments, researchers, and businesses since theUnited States and European Union established it as astrategic focus area in public policy at the millenniumand increased the funding for nanotechnology activities10-fold over the next five years (Woolley and Rottner2008). This gave actors ranging from commercial firmsto universities and research centers the incentive to asso-ciate with the science of the small for access to thesenew funding sources (Zucker et al. 2007, Grodal andThoma 2013). The most widely adopted definition ofnanotechnology refers to the control of matter betweenapproximately 1 and 100 nanometers1 (National Sci-ence and Technology Council 2000). This definition is,however, contested and unclear, which has resulted ina wide spectrum of existing research and developmentactivities being bundled together under the same label(Granqvist and Laurila 2011). For example, incumbentsfrom industries ranging from sporting equipment andtextiles to drug delivery, semiconductors, and photo-voltaic devices have become labeled as nanotechnology,even though many have only a marginal or even tenuouslink. Furthermore, the specialized and complex nature ofthe technology makes it challenging for an observer todetermine whether a firm actually uses nanotechnology(Berube 2006).

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Nanotechnology provides an interesting setting inwhich norms for what constitute the emerging technol-ogy have not yet materialized and where concealmentof firms substantive activities is relatively easy. Thus,stakeholders often accept even inaccurate signals fromfirms conveying their participation in the market becausethey have little or no criteria for judging the validity ofthe signals. For example, venture capitalists may acceptat face value a chemicals firm that signals nanotech-nology because they may lack the particular skills tojudge the technical viability of the claim. Hence, firmswith and without nanotechnology capabilities (hence-forth nano-capabilities) can use the nano-label with fewrepercussions. This arbitrary use of the nano-label hasgenerated confusion about the boundaries of nanotech-nology. Additionally, key stakeholders, including thebusiness press, have voiced concern that the expectationsabout nanotechnology are unrealistic. In particular, theyhave questioned whether nanotechnology companies willever create viable products or generate revenue (Berube2006). Nanotechnology is thus a contested market labelthat is under construction. Because of the ambiguity andinterest that surrounds the label, the emerging marketfor nanotechnology provides a particularly appropriateopportunity to investigate executives market labelingstrategies.

Data

Interviews. We conducted semistructured interviewswith 59 executives from 51 firms related to nanotech-nology. The interviews took place from 2004 to 2006.Because nanotechnology was a nascent market at thetime, executives were actively evaluating the label andmarket while determining their labeling strategies. In theinterviews executives elaborated on their perceptions ofthe label as well as their use of the label in various situ-ations when representing the firm. Interviews allowed usto trace the executives perceptions of nanotechnology,the extent to which they thought their firms had nano-capabilities, and the implications of using the nano-label.We focused on executives because they have the mostextensive understandings of the activities and strategiesof their firms. They also have the greatest leverage tomake strategic decisions, including how their firms arerepresented to external stakeholders (Elsbach 2006).

We used multiple sources to identify suitable firmsto avoid the potential sample bias caused by anysingle sampling strategy. Mirroring standard practiceswithin qualitative research (e.g., Evans et al. 2004,OMahony and Bechky 2006, Santos and Eisenhardt2009), we identified the firms from Web-based nan-otechnology directories and referrals from experts inthe field and interviewees. Of the firms, about a thirdwere randomly selected from nanotechnology directo-ries and two-thirds were identified through referrals.

We acknowledge that our method, like all samplingmethods, has limitations. For example, we may haveexcluded firms that had nano-capabilities but did nothave a reputation for being a nanotechnology companyand did not themselves claim to be one. Reaching thesefirms, however, is outside of the scope of this study.Additionally, such bias adds to the credibility of ourfindings: even sampling among the directory-listed com-panies and including firms based on referrals, we find avariety of labeling strategies.

We selected firms from multiple institutional contextsand across 11 industries participating in nanotechnol-ogy, including biotechnology, chemicals, and instrumen-tation, as a means to increase the robustness of our find-ings (Yin 2008). More than three-quarters of the firmswere start-ups, and the remainder large diversified firms.Further, our sample was composed of 71% North Amer-ican and 29% Northern European firms. All the firmssampled either had a reputation as a nanotechnologyfirm, as they were either identified by field experts orbusiness directory compilers as such, or had themselvescreated an association with nanotechnology. Further, allour firms had some resemblance to a nanotechnologyfirm in that they were high-technology and research-intensive companies active in industries where nanotech-nology is relevant. The sampling strategy, therefore, pro-vided a diverse set of firms for analysis.

Informants within the firms were selected from phoneand email solicitations with firm chief executive offi-cers (CEOs). If the CEO was not available, the authorspetitioned another top executive. Of the informants, 9%were founders, 15% CEOs, 24% founder-CEOs, 15%other chief executives, and 37% other executives or man-agers. Interviews with executives lasted between 20 min-utes and 3 hours, and they covered topics such as thedefinition of nanotechnology, the emergence of the mar-ket for nanotechnology, and aspects of commercializa-tion. We asked each executive to describe her firm andits technology, products, and services. Executives alsodiscussed how they position their firms within the marketand whether they use the nano-label in association withtheir firms. The interviews started with a set of open-ended questions and progressed to free dialogue. Eightypercent of the informants consented to the recording oftheir interviews, which were transcribed verbatim, total-ing over 600 pages. For the remaining 20%, the authorswrote extensive and detailed notes.

Archival Materials. In addition to the interviews, wegathered archival material about each firm from pub-lic sources, including websites, press releases, intellec-tual property reports, and annual reports. These datawere gathered for their details of technologies, productfeatures, and signaling activities. The data allowed usto triangulate the executives accounts of their signal-ing activities and firm capabilities with public sources

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describing such. Specifically, we evaluated the productsand capabilities of each firm to determine whether nan-otechnology was usedthat is, whether they reachedthe size scale of 1100 nanometers.2 The few cases ofdisagreement among data sources were solved throughfurther investigation of firm products and capabilities.

AnalysisQualitative, inductive methods are especially suitablewhen a study explores the emergence of new socialdomains (see Lee 1991). Thus, we used groundedtheory analysis (Charmaz 1983, Glaser and Strauss1967) to identify executives market labeling strategiesand to investigate their antecedents. To remain flexi-ble and make adjustments accordingly, we overlappeddata collection and data analysis in an iterative process(Eisenhardt 1989a). Learning during the data collectionperiod generated an increasingly specific repertoire ofsupplementary questions for successive interviews. Pre-liminary data analysis also occurred while the authorstranscribed the interviews, providing further familiariza-tion with the data. After collection, we analyzed thedata using computer-assisted software. Two of the threeauthors coded each interview. We made several foraysinto the data, and our coding proceeded recursively inthat we reiterated the codes until a clear frameworkemerged.

Identifying Labeling Strategies. The first iteration ofcoding focused on identifying the types of labelingstrategies that the executives employed. We focusedspecifically on instances where executives talked abouthow they position their firms, which labels they used todescribe their firms, and to whom they signaled theseaffiliationsthat is, the different ways in which theydenoted their firm. Through the analysis, we identifiedthree types of symbolic practices that the executivesused: naming, rhetoric, and nonverbal practices. Namingentailed executives purposefully including or excludingnano in the company, product, or unit name. Rhetoricpractices involved executives signaling an affiliation ordisassociation with nanotechnology through language ordiscourse. For example, they made statements such asI often position my firm as a nanotechnology firmor I object when people label us as a nano-firm.Nonverbal practices entailed executives representing thefirm in events such as conferences and networking eventsthat carried the nano-label. Some executives listed theirfirms in nano-related directories or showcased them inmagazines. Others rejected invitations to participate innanotechnology events and actively monitored whethertheir firms were represented in nanotechnology directo-ries, at times requesting removal. After identifying thistypology of symbolic practices, we reanalyzed the inter-views. This analysis led us to the insight that executivesused these three practices to signal their firms affilia-tion with the nanotechnology category. Further analysis

revealed three distinct labeling strategies: claiming, dis-associating, and hedging; we detail these in the Findingssection.

Identifying Antecedents for Label Use. Once we hadidentified the labeling strategies, each author coded theinterviews again to uncover what influenced each exec-utives use of a particular labeling strategy. After dis-cussing and comparing our coding, we identified severalantecedents to executives labeling strategies. Specifi-cally, we found three types of perceptions about the labelthat mapped onto the executives selection of a labelingstrategy. Once we had established the executives label-ing strategies and the associated perceptions, we reex-amined the data to create a deeper understanding of thefine-grained relationship between the two. The conceptsthat evolved from our coding created the foundation forour framework for executives labeling strategies.

FindingsExecutives engage in symbolic management by signal-ing their affiliation, or lack thereof, with the nascentnanotechnology market through their use of the nano-label. We begin this section by identifying three labelingstrategies that executives used to manage their firms cat-egorical affiliation. We compare these labeling strategieswith the firms capabilities but find little relationship.Instead, we uncover that the executives choice of label-ing strategies is mostly driven by their perception of thelabels ambiguity, their avoidance of perceived credibil-ity gaps, and their assessment of the labels signalingvalue. Finally, we integrate our findings into a frame-work for executives labeling strategies.

Executives Labeling StrategiesWe find that labeling is not a simple dichotomousdecisionto use or not use. Instead, we identify threestrategies executives employ to denote their firms mar-ket membership: claiming, disassociating, and hedging.Although the current literature focuses on claiming andgives some attention to disassociating, we uncover thatthese three strategies are equally prevalent in a nascentmarket. Table 1 provides a description and examples ofthe symbolic practices used with each labeling strategy,which we detail below.

Claiming. Claiming involves creating an explicit, con-firmative relationship between the label and the firm.Executives used a claiming strategy by employing thelabel in the firm name or rhetoric or by creating an asso-ciation through nonverbal practices. Signaling that thelabel denoted the firm was thus not only confined to asingle practice but also spanned a wide range of organi-zational actions. For example, Christofer, chief scientistof the start-up NanoCentauri,3 claimed the nano-label by

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Table 1 Executives Labeling Strategies

Claiming Disassociating Hedging

Name of firm Using the label as part of thecompany, product, ordepartment name.

Stating that they chose explicitlynot to have the label as part ofthe company, product, ordepartment name.

Sometimes using the label as a partof the company, product, ordepartment name and at othertimes downplaying or denouncingthis fact.

Examples: Having nano as aprefix or suffix in the companyname, like ZeptoNano orNanoVortex.Establishing a department fornanophotonics and labelinga product asNano-Transmitter.

Examples: I consciously chosenot to include nano in ourname, or in our productnames.We would never considernaming our departmentnano.

Examples: Having nano as part ofthe name, but often presentingthe firm via its acronym, whichhides the nano-association.Naming technology nano-imprintlithography instead of imprintlithography, but never otherwiseclaiming nanotechnology.

Rhetoric practices Explicitly associating the firmand the label or activepromotion of the label.

Examples: I position my firm asa nanotechnology firm.We say we are a nanotechcompany, even on ourcompany T-shirts.

Denouncing a connectionbetween the label and the firm.

Examples: I do not position myfirm as a nanotechnologyfirm.I do not use the nano-label todescribe my firm.

Explicitly claiming the label to somestakeholders while disassociatingto others, or only implying aconnection to the label.

Examples: I use nano inassociation with my firmdepending on what people wantto hear.We have technologies that are atthe nanoscale, so we might beconsidered a nanotechnologyfirm.

Nonverbal practices Representing the firm in activitiesthat carry the nano-label likeconferences, networkingevents, directories, andmagazines.

Refusing opportunities toparticipate in conferences,events, and networking thatcarry the label as a heading,and monitoring that the firmdoes not participate in lists,directories, and magazinesthat use the nano-label.

Selecting a specific type oflabel-related activity in which toparticipate while shunning others,and rhetorically denouncing theassociation between the firm andthe label but still participating inevents that have the label as aheading.

Example: I attend manynanotechnology eventsbecause it helps put my firmon the radar screen ofpossible investors.

Example: I do not want anybodyrepresenting the firm toparticipate in nanotechnologyconferences or networkingevents because I do not wantto position my firm as in thenanotechnology space.

Example: I do not view my firm asa nano-firm, and I do not positionthe firm as such. But we oftenparticipate in nanotechnologyconferences because it is a goodplace to gain visibility.

Note. The proportion of respondents using each labeling strategy was not significantly different across the sample (X2 = 20475; n = 59,p < 0052).

using it in the name of the company and the rhetoric hedisseminated about the firm: I would say that we are areal nanotechnology company. Executives at older com-panies also claimed the nano-label. Clark, the CEO ofNebula, explained that even though his firm was foundedbefore the label existed, he now positions his companyas a nanotechnology firm:

We are very different from some of the other nanotech-nology companies in that we have been making thesekinds of products for 50 years. Because you dont alwaysneed to have a name for ityou just do what you do. Butthen recently, within the last 10 years, nanotechnologyhas come up as a separate field of research and business,and then we could say that nanotechnology is exactlywhat we do.

According to Clark, after the nano-label surfaced,he started positioning Nebula as a nanotechnology firm,whereas before it was positioned as a materials com-pany. In total, only just over a third of the interviewedexecutives claimed the nano-label. Hence, although thesymbolic management literature has focused on inves-tigating claiming activities, our data suggest that otherlabeling strategies are equally abundant.

Disassociating. Disassociating entails actively dis-tancing the firm from the nano-label. Executives disas-sociated their firms from the label by denouncing anyconnection in their firms names, rhetoric, or nonver-bal practices. That is, disassociating executives activelysignaled that the label did not denote the firm. Yettheir firms became part of our sample because some

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stakeholders believed that they were nanotechnologyfirms. A quarter of all interviewees disassociated theirfirms from the nano-label, including Dylan, the CEO ofSupernova:

I have never positioned [my firm] as a nanotechnologycompany 0 0 0nor do I even believe that. We are usingnano-engineering principles to get unique properties andperformance and features that will allow us to do com-mercially valuable things with products in the energy sec-tor. So, nano is not in our name. Four years ago I did notput nano in the companys name for good reason, and itsnot like we went through a name change. My philosophyhas been consistent, which is I dont see [my firm] as ananotechnology company.

Dylan acknowledged that Supernova could haveincluded the nano-label in its name, but he disassociatedbecause he believed that it would signal a lack of com-mercially valuable products. Similarly, David, a boardmember of FemtoScope, succinctly summarized thatFemtoScope is not associated with [nano] activities 0 0 0 0We dont want to position ourselves as a nanotech com-pany because we are not. Thus, our data show that exec-utives attempt to manage their membership in a marketcategory not only through association but also throughdisassociation.

Hedging. The hedging strategy involves the activecreation of ambivalence around the connection betweenthe nano-label and the firm. Executives hedged byimplying a connection with the nano-label, such thatthe message could be interpreted differently by variousstakeholders or by adopting conflicting verbal and non-verbal practices such as both claiming and disassociatingsimultaneously. For example, some executives explicitlyrejected the nano-label in their rhetoric but still repre-sented their firms in nanotechnology conferences andnetworking events. Overall, almost 40% of the execu-tives hedged. For instance, Halle, CEO and founder ofAdvanced NanoSupply, was eager to use the nano-labelfor public relations purposes for some audiences whilesimultaneously managing the negative connotations ofan emerging market among other audiences, such asinvestors:

Nano is sort of a two-edged sword. What were trying todo is play the nano angle for what its worth, put a littlebit of buzz, PR, and excitement while making it quiteclear that this is a business area, these are our products,these are our markets, and were expecting somethingout the door real soon. We can play the nano card aswe see fit. Nobody gets excited about chemical technol-ogy. If we say, Yeah, were doing chemical technology,then stakeholders think of that really smelly area on theNew Jersey turnpike. But with nanotechnology they say,Ooh, nanotechnology. Oh, yeah, cool! Okay! But eventhen we have to be careful to balance our message fordifferent audiences. (emphasis added)

Halle also hedged by strategically manipulating thefirms name. At times she presented the company usingthe full name, Advanced NanoSupply, which includedthe nano-label. In other situations she represented thefirm using only the acronym ANS, concealing an asso-ciation with nanotechnology. Similarly, Homer, CEO ofNanoVortex, hedged by using the firms full name thatincluded the nano-label, but he often explicitly disasso-ciated from the label because he believed that too manyfirms already signaled nanotechnology: I do not posi-tion the company as a nano-company because there areso many companies out there where their focus is to be anano-company. Our data show that the use of the hedg-ing strategy was thus a way for executives to obfuscatewhether the nano-label denoted the firm.

The Relationship Between the Labels Denotationsand Firms CapabilitiesAfter uncovering the executives labeling strategies,we examined the relationship between the strategies usedand their firms capabilities. Much of the current mar-ket categorization literature assumes that label use isrelated to a firms actual capabilitiesthat is, an exec-utive chooses to use a label when its denotations andthe firms technological capabilities are aligned. Of the51 firms in our sample, however, only 31 (61%) hadnano-capabilities. The remaining 20 firms did not havecapabilities in this scale and, hence, were not nanotech-nology firms according to the definition by the NationalScience Foundation. Furthermore, incongruence betweenthe executives labeling practices and the firms capabil-ities was abundant in our data. We found executives infirms with no nano-capabilities who claimed the label,executives in firms with nano-capabilities who disasso-ciated from the label, and executives in both types offirms who hedged the label.

Figure 1 depicts the relationship between an exec-utives labeling strategy and the capabilities of the

Figure 1 Executives Labeling Strategy by the FirmsTechnological Capability

25% (6)

46% (16)

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Note. The proportion of respondents using each labeling strategywas not significantly different across firm capabilities (X2 = 2056;n= 59, p < 0055).

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firm. Only 46% of the executives of firms with nano-capabilities claimed the label. Thus, 54% of such execu-tives chose to distance their firms from the nano-label byusing disassociating or hedging strategies. These exec-utives therefore understated their firms relationship tothe label. Further, of executives in firms without nano-capabilities, 25% claimed and 46% hedged. In otherwords, 71% of executives in firms without capabilitiesoverstated their firms relationship to the label. Overall,our data show that most executives refrained from usingthe labeling strategy that most closely represented theirfirms actual capabilitiesof all executives, 61% chosea labeling strategy that did not consistently align thelabels denotations and the firms technological capabili-ties. The hedging strategy proved to be a popular choiceamong our executives; its use was particularly abun-dant among executives of firms without nano-capabilities(46%). This suggests that hedging was a prevalent strat-egy for executives wishing to overstate their associationwith nanotechnology. In contrast, more than a third ofthe executives from firms with nano-capabilities hedged.

A chi-square test examining the relationship betweennano-capabilities and labeling strategy indicated nosignificant relationship.4 Thus, our results show thatalthough capabilities likely contribute to an executiveschoice of a labeling strategy, they do not explain it.The diverse labeling strategies beg the questions: Whydid the executives at firms with capabilities disassociatefrom the label, whereas those at firms without capabili-ties claim it? And what triggered hedging?

Executives Perceptions of the Nano-LabelAfter establishing the incongruence between the exec-utives labeling strategies and the firms capabilities,we examined what led executives to choose a labelingstrategy. We found that the executives perception ofboth the labels denotations (i.e., its categorical refer-ence) and the labels connotations (i.e., its underlyingmeaning) shaped their labeling strategies. Three aspectswere particularly important: (1) the extent to which exec-utives perceived the labels denotations and connotationsas ambiguous, (2) their perception of the credibility ofusing the label to denote the firm, and (3) their percep-tion of the value that the label connoted to stakeholders.In this section, we examine these perceptions in detailand show how they shaped the executives market label-ing strategies. We include illustrative quotes throughoutand provide further examples in Table 2.

Denotation and Connotation Ambiguity. A key ele-ment in the executives perception of the nano-label wasthe degree to which they perceived ambiguity aroundboth the labels denotations and connotations. Execu-tives considered how stakeholders define the label andwhether this definition would change over time. Theseelements led executives to form an opinion about theambiguity of the label.

How is the label defined? The definition of nanotech-nology was not universally agreed upon, as mentionedpreviously. Instead, multiple definitions of the nano-labelcoexisted. Many executives perceived that the nano-labeldenoted multiple categories and connoted a great vari-ety of meanings to different stakeholders. As expressedhumorously by Hakan, chief scientist at Celestial, Sucha definition [of nanotechnology] has been adopted thatit covers all the topics on earth, from love-making ofelephants to ship building; everything fits in. That is ben-eficial to no one. Hakan perceived that assessing thelabels categorical reference is difficult, if not impossi-ble, because its widely accepted definitions were vagueand lenient. Other executives had a narrow, specific def-inition in mind. For example, Darwin, a technical exec-utive at Shuttle, clarified the variation in the definitionof the nano-label:

My definition of [nanotechnology] is anything where theimportant science is at the nanoscale. For some peo-ple it just means everythingwhere anything involvedis smaller than a micron [1,000 nanometers]. For mostpeople and most definitions, its anything where the fea-tures are under a hundred nanometers. You can be a littlestricter, and thats where the important part of whatsgoing on is under a hundred nanometers. It is not justthat it happens to be smaller, but because its smaller, itdoes something different. (emphasis added)

Also, Darwin expressed that many people had adoptedan overly broad view of nanotechnology. In his view,nanotechnology indicates that the important element ofa feature should be smaller than 100 nanometers andthat this feature should change the functionality of theproduct.

Irrespective of the technological capabilities of thefirm, the executives perception that the nano-labels def-inition was ambiguous led them to hedge the label,but for different reasons. For the executives in firmswithout nano-capabilities, confusion around the labelsdenotations provided the leeway to signal membershipin the nano category through hedging. For the execu-tives in firms with nano-capabilities, perceptions that thelabels connotations were ambiguous generated worriesthat they could not control meanings that the label wouldconvey to stakeholders. Thus, these executives alsohedged. When executives perceived that both denota-tions and connotations were highly ambiguous, however,executives in both types of firms tended to disassociate.

Are the labels denotations and connotations in flux?The majority of our informants perceived that the mean-ing of the label was changing. In particular, many exec-utives worried that in the future, the nano-label mightdenote membership in a stigmatized category and itsuse would generate negative connotations about theirfirms. This risk made executives ambivalent about howthey should use the label. Devan, CEO and founderof Atlantic, stated, I think the category is a serious

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Table 2 Examples: Executives Perceptions of the Nano-Label

Denotation and connotation ambiguityUnfortunately, I think nano has become misused. Anything that seems to be smaller than the normal product line they call nano,

like nano-switches as big as your watch. Its ridiculous.Hayes, board member, StarplaneIm a little bit more cynical on [nano] because when I was young, it was called mesoscale science and technology. All the same stuff

that people are now calling nanoscale science and technology and materials was then called mesoscale science and technology.Halle, founder and CEO, Advanced NanoSupply

People do all these Web analyses 0 0 0and they come to think that a tremendous number of nano-firms have been established dueto the explosive increase in the use of the nano word. However, Web searches do not describe how the activities in this areahave developed. Old firms have adopted the nano prefix, or the entire name of the organization has changed 0 0 0 0 Before firms usedanother name for their technology; however, now they call it nano. Hakan, chief scientist, Celestial

I wont criticize specific individuals, but when you have persons putting out research that is just exaggerated about the impact ofnanotechnology on the world coming from folks less than 30 years of age, plus or minus a few years, who have never lived throughany prior bubbles, and now attempting to believe that this bubble is any different than prior bubbles [in that it will not collapse],I dont think they are necessarily doing the space a great service.Dylan, founder and CEO, Supernova

Denotation credibilityThe question is whether we are a nanotech company 0 0 0 0 What are the dimensions you need to know? The chips we use now are

1 micron [1,000 nanometers]. So, it is close [but not nanotech]. On the other hand, the layers in our chips are down to angstrom,which is below nanometer. They are just a few nanometers thick. To that end, yes, we are a nanotech company.Henrik, CEO,AtomProbe

A lot of the researchers arent even defining themselves as doing nanoscale this or nanoscale that because the community and thefunding are so heavily aligned with some of the other areas that theyre better off just saying that theyre doing celluloid science orpolymer or something else anyway.Halle, founder and CEO, Advanced NanoSupply

Merrill-Lynch came out with this nanotechnology index about the same time that they filed this Nanosys IPO, and what you may havebeen seeing there is an attempt to create a new category in terms of a market segment or sector.Casper, VP, NanoSense

They [an investment firm] would like to position themselves as having something to do with nano. They want some of their portfoliosto be within nanotechnology and biotechnology, and therefore it is a good for us to go out and say, Well, this is nanotechnology,a sort of nanotechnology combined with biotechnology. Hans, CTO, Picolever

Connotation valueIf you can put nano in an application for anything, your chance of getting some money is much higher.Hermione, founder, QuarkMany people have abused the name of nanotechnology as a way of promoting something new because it is a sexy name in attracting

attention.Cyd, CTO and VP, ZeptoSome firms [that claim the nano-label] have been established so that they could get funding from the nanotechnology programs.

Hakan, CSO, CelestialThe main point is that when you do materials or catalysts, design or manufacturing, we have always been thinking nano. It is just

now called nano, and because of the popularity of this area now it is much easier for us to collaborate with universities and getequipment for the task we actually wanted to do.Clark, CEO, Nebula

So [nanotech] is a buzzword that people trigger on and a lot of other companieslike some of our customerswant to have a partof this 0 0 0 0 They want to get into this area, and therefore its a good buzzword to use nanotechnology. Hans, CTO, Picolever

I would say that we are a real nanotechnology company 0 0 0 0 It is a very important part of the company that differentiates us from othersthat we are using statistics to really predict the nanomaterials properties on a nanoscale.Cristofer, chief scientist, NanoCentauri

risk. It is running out of time to legitimize itself.He highlighted that for the nano-label to denote a sta-ble category, the companies employing the label neededto demonstrate both products and a market for theproductsuntil then, the business domain would befounded on tenuous beliefs and excitement:

It comes down to products 0 0 0nanotechnology companieshave been struggling to produce real products. And someof the more well-known ones have had no products. Andproducts have got to happen quickly, or else this wholecategory is going to fall.

Approximately half of the executives expressedconcerns that the nano-label connotes unrealistic expecta-tions about the long-term development of the technol-ogy among its key audiences. In fact, a quarter of theexecutives used the word hype to describe such excite-ment around nanotechnology. Casper, a vice president at

NanoSense, stated, Theres no question that its over-hyped. Hans, the chief technology officer (CTO) atPicolever, along with several other executives, perceivedthat such excitement connoted an impending backlashand the collapse of the nascent category among stake-holders: Nanotechnology is a hype word and it couldimplode. Nanotechnology is still a frontier research area.

Executives at firms without nano-capabilities who per-ceived that the categorical affiliations and underlyingmeanings of the nano-label would deteriorate over timetended to disassociate. When executives in the firms withnano-capabilities perceived the label to be in flux, it gavethem the impetus to hedge. By hedging, executives wereable to take advantage of the short-term benefits of beingassociated with the nano-label while leaving open thepossibility of disassociating in the future, depending onthe labels changing denotations and connotations.

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Denotation Credibility. In the nascent nanotechnol-ogy market, membership in the nano category wasunclear. Similarly, confusion arose as to which execu-tives could be accused of deceitfully using the label torepresent their firms. We found that to assess the credi-bility of using the label, executives considered whetherthe label fit the firm and how stakeholders labeledthe firm.

Does the label fit the firm? An important aspect of thelabels credibility was whether executives thought thatthe nano-label suitably described their firms technology,products, or marketin other words, whether they per-ceived a fit between the labels denotations and the firm.The availability of multiple definitions and the lack ofconsensus regarding their application allowed executivesto appropriate their preferred definitions. For example,among the executives who defined nanotechnology assomething smaller than 100 nanometers, opinions var-ied as to which part of the product or technology wasrequired to reach these dimensions. Cyd, the CTO andvice president of Zepto, explained,

[My company] is vertically integrated, so basically wenot only make the materials, but we also make thedevices and we will build the product too. So in the areaof materials applications, we are 100% a nanotechnologycompany, but the product is going to be a photovoltaic[solar] cell. So if you see the company from the end prod-uct point of view, you are not going to be able to tell ifit is nano or not.

Cyd suggested that if one assesses Zepto as a materialscompany, the use of the nano-label is valid. However, ifone considers only the firms end producta solar cellthe nanotechnology affiliation is less clear. Further, someexecutives in firms without nano-capabilities, who per-ceived their firms to have sufficient resemblance to nan-otechnology, hedged the nano-label. For example, Claus,a board member at StellarWind, considered it plausibleto claim the nano-label even though [our products] tendto be in micromachining, which, strictly speaking, isnot nano according to my definition.

The executives perception of whether using the labelwas credible was also influenced by the degree towhich they thought that their firms market affiliationswere ambiguous. For example, CTO Hans, whose firmPicolever developed biological sensors, considered thestrategic positioning of his company in microtechnology,biotechnology, medical instrumentation, and nanotech-nology, each with its advantages and challenges:

In the beginning we saw ourselves as a microtechnologycompany, but we should not go out and sell ourselvesas a microtechnology company 0 0 0 0 Saying that we are abiotechnology company is also problematic because mostpeople associate biotechnology with drug developmentor something like that. So its probably more a medicalinstrument technology. In the end it really depends whois asking because many people also want us to be nan-otechnology. (emphasis added)

Because Picolever was embedded in multiple techno-logical communities, Hans managed industry affiliationsby assessing and adopting several suitable market labelssimultaneously.

The fit between the labels denotation and the firmscapabilities shaped executives perception of credibilityand thus influenced their choice of a labeling strategy.When firms had nano-capabilities and their executivebelieved the label suitably described the firm and its mar-kets, she was inclined to claim the label. Executives infirms without nano-capabilities who perceived ambigu-ity in the fit among the firm, its markets, and the labelviewed that they could credibly denote the firm throughhedging.

How do stakeholders label the firm? Denotationcredibility was further shaped by executives percep-tion of whether stakeholders denoted the nano-label totheir firms or considered such categorization plausible.Almost two-thirds of the informants (64%) reportedthat stakeholders, such as venture capitalists, consult-ing firms, and the business press, labeled their firms asnanotechnology. These perceptions did not vary accord-ing to the nano-capabilities of the firm. Only a slightlysmaller proportion of the executives at firms withoutnano-capabilities perceived that stakeholders denotedtheir companies with the nano-label compared withthose at firms with nano-capabilities (62% versus 65%,respectively). Stakeholders were eager to label the firmseven if they did not have the relevant capabilities. Execu-tives considered that stakeholders engaged in such activ-ity as a result of their self-interest in creating a novelcategory that would generate a market for their services.According to executives, stakeholders in particular usedthe nano-label to denote successful firms.

For example, Hector, CEO of ZettaMaterials, ex-plained that his firm was often asked to present at confer-ences titled nanotechnology even though his firm didnot fit the official nanotechnology definition: This ideaof things that are smaller than a hundred nanometers andthat by virtue of those dimensions produce novel phys-ical propertiesthats not what were doing at all, buthere we are, lumped into that [nano] category. Devan,CEO and founder of Atlantic, also perceived a wide dis-agreement among stakeholders about his firms categor-ical membership:

[My company] gets categorized variously as a micro-fluidics company, a nanotechnology company, a nanobio-technology company, a biotechnology company, which inone sense is good for us because its indicative of the factthat we dont really fall neatly into any specific category,which means that were doing something new, which isgreat, of course, but also a challenge.

Executives perceptions of stakeholders labelingactivities generated differing responses. When stakehold-ers labeled the firm as nanotechnology, executives infirms with nano-capabilities appeared more likely to

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claim the label, whereas those in firms without nano-capabilities perceived that they could credibly use thelabel, which seemed to lead them to hedge. If exec-utives perceived that stakeholders did not label theirfirm, it led executives in firms with nano-capabilities tohedge, whereas the lack of such attention from stake-holders led executives in firms without nano-capabilitiesto disassociate.

Connotation Value. Finally, the executives labelingstrategy was shaped by their perception of the valueof the connotations that the label invoked. Executivesconsidered this by assessing the labels affiliation withresources and its ability to differentiate the firm.

Is the label affiliated with resources? An impor-tant task for executives is to secure access to materialresources such as public and private funding and intan-gible resources such as legitimacy and collaboration.Executives considered the connotations that the labelinvoked for stakeholders and how these influenced theirfirms access to resources. For example, some execu-tives perceived that the nano-label compelled stakehold-ers to fund companies, whereas others stated that theuse of the nano-label undermined their ability to obtainfinancing. Halle said, A lot of people see nano andthey just assume you dont have a product yet or thatyoure not going to make products. She continued tosay that the nano-label invoked a perception that the firmis at the precommercial stage, and it would take con-siderable time before the launch of actual products andcash flow. Hakan had a similar view: The nano wordhas been used as an excuse for [not investing]. They[firms] say that it is interesting and important, but notyet our concern.

However, the majority of executives believed thatusing the nano-label helped them obtain resources. Forexample, Charles, director at Pluto, said that he usedthe nano-label because the National NanotechnologyInitiative has funded a lot of nanotechnology research,and so were trying to engage with them on a numberof projects. Governments around the world launched avariety of nanotechnology programs, and many venturecapitalists dedicated funds to invest in nanotechnology.In response, executives often included the nano-labelin grant proposals, websites, advertising material, andpress releases. Even executives who chose not to usethe nano-label recognized that it could be used to gainaccess to resources. For instance, Dean, vice president ofAttoSemi, did not want to use the nano-label but argued,Investors will invest in everything that has the wordnano in it. He further clarified:

When you are fund-raising, having the word nano infront of [the firms name] most probably helps because

it at least opens up the door. As much as people say,Oh, there are so many nano-firms, I can guarantee thateveryone will look at [the business plan] because theydont want to be the one that rejects it. What if a pro-posal comes for a Nano-Intel, and 20 years from nowtheyll be writing on their websites that they missed [theopportunity]? So the word nano does buy you the entrycost 0 0 0 0 I think it opens the door. If I send [venture cap-italists] a business plan saying nano, they will mostprobably look at it.

According to Dean, the nano-label connotes that the firmhad the potential to become a large and influential com-pany (i.e., the Intel of the nanotechnology world), whichattracted the attention of venture capitalists.

The perception of whether the nano-label facilitatedor deterred access to resources shaped the connotationvalue that executives attributed to the label. Executivesin firms both with and without nano-capabilities weremore likely to claim the label if they perceived that itfacilitated access to resources. Similarly, executives weremore likely to disassociate from the nano-label if theyperceived that it would deter potential investors.

Does the label differentiate the firm? Most of ourinformants choices of labeling strategies were shapedless by striving to be similar to high-status or success-ful firms than by trying to signal uniqueness. Execu-tives varied in the extent to which they perceived thenano-label as a differentiatorthat is, whether the nano-label connoted novelty. For example, Homer, CEO ofNanoVortex, viewed the nano-label as an important vehi-cle to distinguish his firm from other companies:

I think it [having nano in our name] has been an advan-tage in terms of profile and separating us from a lotof other companies that are out there. Any time peoplewere potentially interested in nano, we were positionedvery well.

Executives were, however, also concerned about theextent to which the label would generate negativeconnotations by grouping their firms with wannabecompanies. For example, Dean disassociated from thenano-label to differentiate his company from the manycompanies using it: So it [not using nano in our name]is just a sign that we wanted to distance ourselves frombeing lumped in with all the 30, 40 companies that usethe prefix nano.

The perception of how other firms used the nano-labeland the extent to which the label would attract stake-holders attention shaped the executives perceptions ofthe labels connotation value. Executives who perceivedthat the label signaled uniqueness for their firms, bothwith and without nano-capabilities, were more likely toclaim the label. In contrast, those who perceived thatthe label was used symbolically by firms without label-related capabilities tended to disassociate.

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Framework for Executives Labeling StrategiesOur analysis of the data shows that executives use ofnascent market labels is not mainly driven by firmscapabilities, as suggested by the market categorizationliterature. Rather, our study revealed that the executivesperception of the labels ambiguity, their avoidance ofperceived credibility gaps, and their assessment of thelabels signaling value shape their labeling strategies.A framework emerged from these findings that specifiesthe relationship between the executives perceptions andtheir labeling strategies, as depicted in Figure 2.

First, the framework unpacks the impact of ambigu-ity on executives labeling strategies. We find that theextent to which executives perceive ambiguity aroundthe labels denotations permits executives in firms with-out capabilities to overstate the label, that is, to signaltraits that extend beyond a firms actual product features.Hedging is a particularly useful strategy for overstat-ing, as it allows these executives to signal capabilitieswhile simultaneously managing the risk of delegitima-tion that can arise from using the label misleadingly.In contrast, the extent to which executives perceiveambiguity about a labels connotations entails risks forexecutives in firms with capabilities, who respond byunderstating their firms affiliation through hedging. Thisallows such executives to gain short-term benefits whilemanaging the potential longer-term deterioration of thelabel. In contrast, executives in firms without capabilitiesrespond to the risk of deterioration through disassociat-ing. When executives perceive that both the denotationsand the connotations of the label are ambiguous and influx, they disassociate from the label, regardless of theirfirms capabilities.

Figure 2 Framework for Executives Labeling Strategies

Firms with label-related capabilities Firms without label-related capabilities

Denotation andconnotationambiguity

Labels definition is unclear

Labels denotations and connotationsare in flux

Labels denotations and connotationsare highly ambiguous and in flux

Denotationcredibility

Firms activities resemble label;stakeholders assign label to firm

Label signals an illegitimate affiliation;stakeholders do not assign label to firm

Connotationvalue

Label creates access to resources;label signals uniqueness

Label use induces negative perceptionsof the firm

Executives perceptionsExecutives labeling strategy

Claim Hedge Disassociate

Second, the framework shows that executives considerwhether using a label creates credibility gaps. Executivesbase this perception on whether the firms products andcapabilities resemble the labels denotations and on theirperception of stakeholders denoting activities. Execu-tives in firms without capabilities who perceive the labeluse to be credible overstate their firms affiliation byemploying a hedging strategy. In contrast, executives infirms with label-related capabilities with the same per-ception tend to claim the label. If executives in firmswithout capabilities consider that the label signals animplausible and illegitimate affiliation, then they tend todisassociate from the label. Further, executives in firmswith capabilities who perceive that stakeholders do notconsider them part of the emerging category tend tohedge, whereas executives in firms without capabilitiesdisassociate.

Finally, according to our framework, executives whoperceive that the label has connotation value in termsof obtaining resources or signaling uniqueness tend toclaim the label regardless of their firms capabilities.Similarly, executives in both types of firms who con-sider that the label may impair access to resources byinducing negative associations of the firm are likely todisassociate.

DiscussionHow executives adopt and manipulate symbols plays animportant role in the success and survival of their firms(Dutton and Dukerich 1991, Elsbach 1994). Yet the extantliterature on symbolic management has paid scarce atten-tion to how executives manage their firms membershipin a market category. We identify market labels as an

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important resource that needs to be symbolically man-aged by showing that executives use market labels strate-gically to guide stakeholders perceptions of their firm.Our findings show that executives do not accept marketcategories as prescribed classification brackets but thatthey actively manage their firms category membershipdepending on their perceptions of the labels connotationsand denotations.

Antecedents of Executives Labeling StrategiesThe study contributes to the emerging research on mar-ket labels by identifying antecedents to a wider range ofexecutives labeling strategies than has previously beenappreciated in the literature. We find that although firmcapabilities may influence label use, they do not fullyexplain executives labeling strategies. Rather, execu-tives perceptions of the labels ambiguity, denotationcredibility, and connotation value shape these strategies.These findings extend current theory in symbolic man-agement and market categorization by looking beyondthe explicit denotations of a label to consider the impor-tance of a labels wider meaning.

First, in much of the symbolic management litera-ture, ambiguity implicitly underlies and enables sym-bolic actions (e.g., Lounsbury and Glynn 2001, Zott andHuy 2007, Westphal and Zajac 1998). How ambiguityshapes symbolic management strategies has, however,been granted limited explicit attention, with few excep-tions. Studies suggest that executives respond to ambi-guity by actively attempting to influence participantsunderstanding of market concepts and by scanning theenvironment for more information (Weick 1995, Santosand Eisenhardt 2009). We extend this work by show-ing that ambiguity evokes concern among executives oflosing control over the meanings that a market label con-veys about their firms to stakeholders. Executives mon-itor the possible corruption of the labels denotations toavoid an affiliation with a stigmatized category whileconsidering the labels changing connotations to safe-guard against unwanted perceptions of the firms activ-ities. Executives thus attempt to manage the effects ofambiguity by assessing the meaning and stability of themarket label while at the same time keeping an eye onthe firms desired market position.

Second, we find that executives consider whetherusing the label creates credibility gaps. Previous studiesin symbolic management examine how specific symbolicactions add to firms credibility in general (e.g., Zott andHuy 2007) rather than evaluate whether a specific actionper se is credible for a particular firm in a given situ-ation. We find that executives perception of credibilityinfluences their labeling strategies, especially in ambigu-ous contexts that afford leeway to use labels decoupledfrom their firms actual capabilities (see Alvesson 1990).Rather than capabilities, a mere resemblance may be suf-ficient for executives to credibly and legitimately claim

membership in a category. Opinions differ about whichfirms rightfully belong to a nascent category, therebyconfounding the determination of who engages in decep-tion or the willful delivery of false information (Shul-man 2007, p. 6). In contrast to other studies where con-formers and offenders are clearly defined (Hudson andOkhuysen 2009, Phillips and Kim 2009), our findingsindicate that such a division is difficult to determinebecause who rightfully or deceitfully uses a label isnegotiated among market participants. Previous researchalso suggests that organizations face a trade-off betweengaining access to the affiliated resources and the riskof delegitimation caused by the misleading use of sym-bols (Ashforth and Gibbs 1990). Our study stresses thatby considering the credibility of their labeling strategies,executives manage the delicate boundary between legit-imate and illegitimate actions.

Symbolic Management Through DisassociationStudies have focused on how firms gain beneficial out-comes by claiming affiliations (Fiss and Zajac 2004,Westphal and Zajac 1998). We find that although claim-ing a label is a frequent strategy, two other labelingstrategies involving aspects of negation are equally com-mon, hedging and disassociating. We find that ambiguityabout a label undermines the usefulness of claiming andprompts executives to consider alternative strategies fordenoting the firm. Yet although our data show that innascent markets hedging and disassociating are widelyused in symbolically managing a firms affiliation witha market category, to date, such negation strategies havebeen largely overlooked in the literature.

Similar to Elsbach and Bhattacharya (2001) andWeber et al. (2008), we demonstrate that executivesstrive to manage perceptions of their firms by explicitlydistancing them from certain labels. Both legitimationand delegitimation of labels can be swift in nascent mar-kets (Glynn and Marquis 2004), making executives abil-ity to disassociate their firm from a market label essentialto its survival. Overall, it is not surprising that exec-utives in firms without label-related capabilities rejectthe label. We found, however, that such executives areforced to engage in active disassociating, because theyperceive that stakeholders categorize their firms based onself-interest rather than on firm capabilities. Our studyshows that executives have to actively engage in disas-sociation in order to avoid inclusion in unwanted cate-gories. Other executives disassociate from the label eventhough their firms have the necessary capabilities. Thus,rather than merely assessing firm capabilities and theirfit with the label, executives evaluate the stability andsustenance of the label itself as a symbolic resource withvalue to the firm. Disassociation is a preferred strat-egy, particularly for those executives who perceive thatthe labels denotations have been obfuscated by firms

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that lack the necessary technological capabilities. Dis-associating allows executives to avoid affiliation with apotentially stigmatized category that in the future mightgenerate unfavorable connotations and impair access toresources. Thus, our study extends the work of Phillipsand Kim (2009) and Hudson and Okhuysen (2009)by uncovering how executives assess and select legiti-mate labels over stigmatized ones to manage categoricalmemberships.

Hedging Membership in a Nascent Market CategoryOur findings on the hedging strategy have implica-tions for the debate on the value for firms of beingassociated with multiple categories (Hsu 2006, Hannanet al. 2007). The market categorization literature hasshown that firms face adverse consequences if theyare perceived to belong to several categories simultane-ously (Zuckerman 1999, 2000). Other empirical studiesfind that bridging multiple categories can be advanta-geous (Padgett and Ansell 1993), particularly after actorshave gained legitimacy (Zuckerman et al. 2003), andthat balancing stakeholders interests is an importantstrategic response for firms when managing ambiguousenvironments (Oliver 1991, Fiss and Zajac 2006, Ruefand Patterson 2009).

Our study adds to these literatures by unpacking howexecutives can use ambiguity as a tool for symbolicmanagement. First, adopting a hedging strategy affordsdistance, but not exclusion, from the categorical affili-ation of a market label. As discussed above, signalingambivalent category membership provides a means tomanage the risk of deceitful use of a label and to safe-guard against potential future dilution of the category.Second, in nascent markets, executives often manageaffiliations with several markets simultaneously. Usingmultiple labels reflects executives struggle to makesense of their firms categorical membership. Hedgingtheir bets allows them to postpone binding claims aboutany single market category. Third, by hedging, execu-tives enable stakeholders to interpret the label depend-ing on their own predispositions. Executives can use anascent market label so that it is meaningful in a specificcontext, but not consistent across firms various activitiesor encounters with different stakeholders. As a result,executives attempt to satisfy the demands of stakeholdersin multiple markets. We show that bridging multiple cat-egories through hedging affords agility for executives tomanage ambiguity and associated risks of nascent mar-kets, making noncommitment to any market category aparticularly valid strategy.

Extensive use of the hedging strategy, however, par-ticularly when executives consistently overstate affilia-tion with the category, may affect the legitimation ofthe category itself. Studying total quality management,

Zbaracki (1998) showed that decoupling a label fromreality can accelerate and ultimately challenge thelegitimacy of a category (see also Isenberg 2001,Brunnermeier and Nagel 2004). Our findings add to thisliterature by suggesting that even inconsistent use ofa label by firms without capabilities may have nega-tive outcomes for the market formation. In our data, theuse of the label by executives from firms without label-related capabilities triggered disassociation by others,who perceived a diminished veracity in the labels cate-gorical reference. Nonsubstantive labeling practices canreinforce such perceptions of diminished veracity, creat-ing a vicious cycle where disassociation by executives infirms with capabilities gives rise to decoupling betweensubstantive features and label use, thus creating furtheropportunities for executives in firms without capabilitiesto claim or hedge the label. Therefore, nonsubstantivelabel use can generate untenable expectations that mayfacilitate the collapse of a category.

Our study has implications beyond emerging domainsof activity to other ambiguous contexts characterizedby fluid categories including high-velocity environments(e.g., Eisenhardt 1989b) and firms at the boundariesof stable industries (e.g., Chen and OMahony 2009),where executives make strategic decisions about how toposition their firms within several possible categories.Similarly, more stable markets that experience a radicaldiscontinuity also suffer from a fundamental shift andheightened ambiguity, where companies need to navigatenovel market categories (Tushman and Anderson 1986,Suarez and Lanzolla 2008). Even established industries,such as telecommunications and pharmaceuticals, areunder constant transformation as their boundaries flexto fit new technologies and organizations that associatethemselves with the industry label. Further, the connota-tions of established market labels may change, makingan affiliation disadvantageous. For example, the multipleenvironmental and health scandals involving the chem-ical industry have made the chemicals label unfavor-able (Hoffman 1999)

granqvist et al. 2014

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