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The purpose of this paper is to argue that the kind of variety among firms that is a condition for economic progress is fundamentally based on the intellectual capital (IC) of each firm.

The theoretical analysis is illustrated with case study findings from the Finnish games industry.

The firm heterogeneity essential for the development of a knowledge‐intensive industry cannot be accurately captured with the concepts “routines” or “dynamic capabilities”. Instead, IC should be adopted for this purpose as it emphasises the skills, actions and determination of people and their interactions, thus capturing the uniqueness of each firm.

Case study findings from other knowledge‐intensive industries would be needed to make the argument more general.

Papers approaching IC from the industry‐level have been scarce, likewise papers tying IC to the evolutionary theory of economic change.

The purpose of the paper is to conceptually elaborate two important mechanisms, authenticity and fuzziness, that affect how audiences react to deviations from existing genres by artists that are making their first entry. In cultural industries such as music, social categorization systems play an important role in the success of actors. Audience members evaluate entering artists vis‐à‐vis the existing, collective system of categories and related normative social codes, and may or may not impose penalties for code violations.

This is a conceptual paper and the conceptual framework is built on recent theorization regarding social categories in organizational fields. A key premise is that such categories, including musical genres, are fuzzy with blurred boundaries and partial membership. Such fuzziness is likely to affect organizational viability and dynamics.

Based on the conceptualization, the baseline proposition is that artists making their first entry are likely to face higher penalties by audiences if they deviate from existing genres. However, the higher the idiosyncratic authenticity of an artist, the smaller such penalties are. Moreover, we expect penalties to be smaller when genre fuzziness increases.

Besides contributions to theory, the propositions that are stated in the paper should have relevance to record companies and artists when they are making strategic decisions regarding artist identity upon first entry.

The paper offers a novel perspective to extant research in music regarding genres, categories, and organizational identities. Furthermore, the paper contributes to recently emerged sociological theory on fuzzy categories and authenticity.