Several streams of strategy literature emphasize firms’ distinctive strategy as being key to sustainablecompetitive advantage. Using a unique natural experiment setting, we examine how increased scrutinyand pressure from short-sellers affect the strategic distinctiveness of the firm. We find that increasingshort-selling pressure reduces the strategic distinctiveness of the firm and that this negative effectis more pronounced for more visible and underperforming firms. Our findings suggest that removingrestrictions on short-selling can have an unintended side-effect of reducing the strategic distinctivenessof firms.