Signalling theory

About: Signalling theory is a research topic. Over the lifetime, 63 publications have been published within this topic receiving 2366 citations. The topic is also known as: Vilmo.

Evaluating innovation investment outcomes of government venture funding : a longitudinal, multi-level, multi-source analysis of small firms in the U.S.

Abstract: The study examines the role of government venture funding in facilitating entrepreneurship and innovation. In particular, the study integrates financial and behavioural perspectives in a unified framework to analyse the determinants and outcomes of innovation investments designed to help small firms commercialise their research and development activities. On the one hand, it draws upon real options reasoning theory to understand the effects of various resource allocation strategies on investment yield and firm performance. On the other hand, it uses signalling theory and the attention- based view to examine which individual-, project- and firm-level characteristics affect early- and late- stage funding allocation decisions, and whether these signals are also accurate predictors of investment yield and firm performance. To investigate government investment patterns, 367 projects from 275 firms that participated in the Small Business Innovation Research (SBIR) programme administered by the National Health Institute in the U.S. were analysed over a seven-year period from 2006 to 2012 using a combination of statistical and econometric techniques. First, the study finds that the formal real options reasoning (ROR) structure evident in the composition and execution of the government venture funding programme is only intuitively underpinned by the real options logic of decision-making. The results reveal that high initial funding commitment and continuation of government venture funding have a diminishing effect on return on investment, whereas consistent matching of funding decisions in line with ROR allows to extract value from staged investments. Second, drawing on signalling theory and attention-based view helps uncover discrepancies between prescribed and actual investment behaviour. Third, to benefit from options-like investments, firms require different combinations of skills and capabilities depending on their experience and the target performance outcome. In sum, the study adds to the empirical body of literature analysing the tension between economic logic of efficient resource allocation and behavioural and cognitive effects on rational sense- making. The analysis delineates boundary conditions of real options reasoning in the context of government venture funding, which provides important implications for strategic management theory and research policy.

Corporate Reputation: Do Board Characteristics Matter? Indian Evidence:

Abstract: Drawing inference from signalling theory, the study attempts to examine the relation between corporate governance and corporate reputation in the Indian context. There is hardly any study d...

The signalling role of audit committee characteristics and the cost of equity capital: Australian evidence

Abstract: The purpose of this study is to examine whether audit committee characteristics influence the cost of equity capital.,Drawing on signalling theory, this study hypothesises that the presence of an AC with adequate characteristics serves as a market “signal” of the credibility of the effective monitoring process and hence affects the perception of capital providers on the cost of equity capital. The study uses a multiple regression analysis on data collected from a sample of top Australian listed firms.,The study finds that audit committee characteristics such as size, meeting frequency and independence are significantly and negatively associated with the cost of equity capital. However, there is no significant evidence that the financial qualifications of audit committee directors are associated with the cost of equity capital.,While there have been several studies examining the cost of equity capital, there is very limited research on the cost of capital in Australian firms. The study aims to fill this gap, in part, and contribute to the literature on corporate governance and signalling theory.

Do Employment Experience and Attractiveness Rankings Matter in Employee Recommendation? A Firm-level Analysis of Employers:

Abstract: In this article, we draw on psychological contract theory to examine the influence of employees’ experiences on their ‘employer of choice’ recommendation and on signalling theory to examine the inf...

When does reputation lie? Dynamic feedbacks between costly signals, social capital and social prominence

Abstract: Performing a dramatic act of religious devotion, creating an art exhibit, or releasing a new product are all examples of public acts that signal quality and contribute to building a reputation. Signalling theory predicts that these public displays can reliably reveal quality. However, data from ethnographic work in South India suggests that more prominent individuals gain more from reputation-building religious acts than more marginalized individuals. To understand this phenomenon, we extend signalling theory to include variation in people's social prominence or social capital, first with an analytical model and then with an agent-based model. We consider two ways in which social prominence/capital may alter signalling: (i) it impacts observers' priors, and (ii) it alters the signallers' pay-offs. These two mechanisms can result in both a 'reputational shield,' where low quality individuals are able to 'pass' as high quality thanks to their greater social prominence/capital, and a 'reputational poverty trap,' where high quality individuals are unable to improve their standing owing to a lack of social prominence/capital. These findings bridge the signalling theory tradition prominent in behavioural ecology, anthropology and economics with the work on status hierarchies in sociology, and shed light on the complex ways in which individuals make inferences about others. This article is part of the theme issue 'The language of cooperation: reputation and honest signalling'.