Less is More? Cognitive-linguistic Insights into the Adoption of Category Labels

Categories affect competitive dynamics. Despite progress in understanding categorization dynamics in markets, to date only few studies take into account the linguistic nature of category labels in explaining their adoption. We integrate research from psycholinguistics to study how the linguistic structure of category labels shape their adoption in a market. In particular, we theorize about the importance of the number of cognitive components in a category label, the length of a category label, the speed at which the category label can be pronounced, and the use of spatially unified compounds (e.g. “smartphone” vs. “smart phone”) in influencing label adoption. We find that label adoption is increased with labels that have fewer cognitive components, are shorter, can be pronounced more quickly, and those whose components are unified. Our results remain consistent both in an archival investigation with data from the smartphone industry and in two online experiments. Our results provide a novel perspective to the literatures of categorization and industry evolution.