Signaling theory is about decision-making and communication. It describes scenarios where signalers send observable signals that carry credible information about unobservable qualities. When decision-makers have incomplete or imperfect information, signals can help them make better decisions. The power of a signal, though, lies in its cost, with the best signals being highly costly for low-quality signalers and less costly for high-quality signalers. Given the centrality of these ideas in the organizational sciences, we examine management studies that use signaling theory to help explain phenomena that occur within and among organizations. Our review draws attention to how signaling theorists have introduced important complexities to the signaling process, uncovered theoretical boundary conditions of signaling, described new actors within signaling systems, and demonstrated novel ways to apply signaling theory to understand behavior in an array of research contexts involving a wide range of organizational stakeholders. We also offer ideas about how scholars can account for costs when they apply the theory, extend the theory in more organizational settings, and create abstract extensions of the theory’s major concepts. Our intent is to provide researchers with a panoramic perspective on the state of signaling theory and inspire further development so that we can collectively advance signaling theory as much in the next decade as it has advanced in the last.

Tournament theory is useful for describing behavior when reward structures are based on relative rank rather than absolute levels of output. Accordingly, management scholars have used tournament theory to describe a wide range of inter- and intraorganizational competitions, such as promotion contests, innovation contests, and competition among franchisees. While the use of tournament theory has gained considerable momentum in recent years, the ideas that underlie the theory have become blurred and potentially useful insights remain trapped within disciplines. We, therefore, provide a synthesis of the theory’s foundational concepts, review its use in the management literature, identify advancements from related disciplines that may be imported to management research, and delineate the steps likely to be critical to moving the theory forward. Our hope is this review will make tournament theory more accessible and salient to management researchers with a view toward developing more nuanced versions of the theory and applying it in a wider range of contexts.

Management researchers have long been concerned with the antecedents and consequences of managerial compensation. More recently, scholarly and popular attention has turned to the gap in pay between workers at the highest and lowest levels of the organization, or “pay dispersion.” This study investigates the performance implications of pay dispersion on a longitudinal (10-year) sample of publicly traded firms from multiple industries. We combine explanations based on tournament theory and equity theory to develop a model wherein pay dispersion has opposing effects on a firm’s short-term performance and their trend in performance over time. We also show that ownership is a key antecedent of pay dispersion. Specifically, transient institutional investors (who have short time horizons and equity stakes in a wide variety of firms) positively influence pay dispersion whereas dedicated institutional investors (who have longer investment time horizons and equity stakes in fewer firms) negatively influence pay dispersion. We discuss the wide-ranging implications of these findings for scholars, managers, and policy makers alike.