Abstract:

Signaling theory is useful for describing behavior when two parties (individuals or organizations) have access to different information. Usually, one party, the sender, must choose whether and how to convey (or signal) this information to the other party, i.e. the receiver. However, the receiver must decide how to interpret the signal. Therefore, signaling theory plays an important role in various management publications, including strategic management, entrepreneurship, and human resource management (Connelly, Certo, Ireland, and Reutzel, 2011).