New ventures need to convey their novelty to obtain favorable evaluation and resources, yet how firms exaggerate or understate due to their heterogeneous characteristics is less explored. Our study investigates how the degree of strategic differentiation influences a firm’s novelty frames through its perceived competitive advantages and perceived need for legitimacy. By examining 1717 Chinese publicly listed firms included in the CVSource database and initiating IPO from 2001 to 2023, we found a negative relationship between strategic differentiation and novelty frames in the IPO Prospectus, which is strengthened by patent stock and weakened by firm size. Our findings yield significant implications, contributing to the literature on optimal distinctiveness, strategic differentiation, and entrepreneurial framing strategies. We also advance the methodology for assessing differentiation and novelty through linguistic approaches.
