Signaling Theory: State, Future, and Management Applications

The provided text is an excerpt from a 2025 Journal of Management article by Connelly et al., which offers a comprehensive review and future agenda for Signaling Theory in organizational sciences. Signaling theory explains how observable signals convey credible information about unobservable qualities to decision-makers, with the efficacy of a signal resting on its costliness. The review categorizes prior management research into two main groups: organizational-level signaling, often targeting shareholders and customers, and individual-level signaling, frequently aimed at prospective employers and co-workers. Furthermore, the authors call for increased scholarly focus on aspects such as consistently accounting for signal costs (including "reaction costs"), expanding research to neglected stakeholder groups like suppliers and governments, and exploring the complexities of multi-party signaling and receiver attributions.