Repositioning, audience churn, and identity ambiguity: The external costs of market repositioning

Pengfei Wang

Strategic Management Journal, 2025, vol. 46, issue 6, 1363-1391

Abstract: Research Summary Prior literature has long underscored the importance for market actors to establish clear identities. Extant studies mostly adopt a static view, assessing whether actors adhere to a specific prototype or membership. By stressing a dynamic perspective, we maintain that identities are in flux as actors constantly shift positions. Specifically, we emphasize that repositioning can induce identity ambiguity, undermining the accuracy of audience evaluation. Analyzing market repositioning of US firms, we find that firms with greater repositioning tend to experience a higher degree of churn in their coverage audiences (financial analysts). More importantly, audiences are found to be less accurate in evaluating firms that undertake greater repositioning. These results align with our conjecture about external repositioning costs: Firms risk incurring identity ambiguity when shifting market positions. Managerial Summary Firms constantly reposition in the market via adjusting their product portfolios. We maintain that firms with greater repositioning are subject to considerable external costs, because repositioning can breed ambiguity about their market identities. By analyzing product market positioning and repositioning of US public firms, we find that firms' repositioning often leads to an increased turnover of analysts covering them and undermines the accuracy of analysts' forecasts on their earnings. Our extensions also indicate that firms' repositioning efforts may be less ambiguous, when their initial position is more conventional in the product space and/or when analysts have developed greater firm‐specific experiences. Together, the findings underscore the importance for firms to consider external costs in their repositioning processes.

Date: 2025
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