A Systematic Review of Signaling Theory in Nonprofit Research

• In Event: Applying, Extending, and Refining Theoretical Approaches to Understand Voluntary Action

Abstract

Background and Research Aim
Signaling theory are growing rapidly in popularity in public administration and nonprofit management research. One of the reasons is that signaling theory helps resolve one of the main obstacles new organizations face: reducing information asymmetries for diverse stakeholders such as funders/donors, strategic partners, and beneficiaries, which are important issues that nonprofit research focuses on. For example, scholars applied signaling theory to examine the sector as a quality signal’s influence on citizen preferences for products or services (Witesman et al., 2022). Scholars also examined the signaling value of third-party certificates, and self-proclaiming to be socially entrepreneurial (Willems et al., 2017), organizational identities (Levine-Daniel & Eckerd, 2019), and the nature of the projects (Moleskis et al., 2019). Some recent studies have also tapped into the signaling effect of fiscal probity (Mitchell & Calabrese, 2022), and board giving (Hung, 2023) on mission impact and external donations.

Despite an increasing body of literature assessing signals in the nonprofit context, little review of the application of signaling theory in this field has occurred. As such, it has created a concern: no consensus exists regarding the theory’s underlying constructs and there is a limited systematic understanding of what and how to signal to external stakeholders. Given the wide variety of signals, which are assessed in diverse contexts ranging from crowdfunding, philanthropic donations, and citizen perceptions, the current body of knowledge lacks an integrative framework for organizing these findings.

To fill this gap, this systematic review serves as an introduction to signaling theory in nonprofit research by highlighting what and how to signal to external stakeholders. I provide examples from nonprofit management and related literature to create a detailed resource on signaling theory application in nonprofit research.

Methodological Approach
I will conduct a systematic review of the literature following the PRISMA statement (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) to identify the body of knowledge on signaling theory in nonprofit research. In this review, I will consider three search strategies. First, I will search electronic databases for the terms including “signal*” and keywords: “nonprofit*” OR “philanthropy” OR “public” OR “third sector” OR “nongovernment”. Second, I will search leading and specialized nonprofit or public administration journals using the search terms. Finally, after reading titles and abstracts, I might exclude some studies that do not refer to signaling or do not deal with nonprofit or public administration.


Contributions
This systematic literature review will potentially make several contributions. Theoretically, it will synthesize the current state of knowledge about signaling theory in nonprofit contexts, and clarify the relationship with other theories. Empirically, it will identify what and how the signals are used to enhance the communication between organizations and diverse stakeholders.

References

Reference
Hung, C. (2023). To give or not to give? The influence of board giving on nonprofit external donations. Nonprofit and Voluntary Sector Quarterly, 52(4), 1117-1133.

Levine Daniel, J., & Eckerd, A. (2019). Organizational sensegiving: Indicators and nonprofit signaling. Nonprofit Management and Leadership, 30(2), 213-231.

Mitchell, G. E., & Calabrese, T. D. (2023). The Hidden Cost of Trustworthiness. Nonprofit and Voluntary Sector Quarterly, 52(2), 304-326.

Moleskis, M., Alegre, I., & Canela, M. A. (2019). Crowdfunding entrepreneurial or humanitarian needs? The influence of signals and biases on decisions. Nonprofit and Voluntary Sector Quarterly, 48(3), 552-571.

Willems, J., Waldner, C. J., Dere, Y. I., Matsuo, Y., & Högy, K. (2017). The role of formal third-party endorsements and informal self-proclaiming signals in nonprofit reputation building. Nonprofit and Voluntary Sector Quarterly, 46(5), 1092-1105.

Witesman, E. M., Silvia, C., & Child, C. (2022). The enduring role of sector: Citizen Preferences in mixed markets. Journal of Public Administration Research and Theory, 32(4), 765-780.

Author

• Chen Ji, Louisiana State University Shreveport