Trinity Business School, Trinity College Dublin, Singapore
While signaling research has posited that signal ambiguity stems from signal fit—the correlation between a signal and multiple underlying attributes, we suggest that ambiguity might also come from signal volume. In the theoretical context of non-expert partners—the signalers—emitting capability signals to form alliances with expert firms—the receivers, we investigate how different volumes of capability signals influence non-expert partners’ alliance formation with expert firms. Our argument is that a low volume of signals communicates a non-expert partner’s needs for complementary expertise, convincing expert firms to form alliances with it for value capture, while a high volume of signals indicates the non-expert partner’s high quality, leading expert firms to ally with it because of similarity in competence. A medium volume of signals renders a zone of ambiguity, as it does not clearly convey either the non-expert partner’s needs or existing quality. Accordingly, we expect a U-shaped relationship between a non-expert partner’s volume of capability signals and its alliance formation with expert firms, and that this relationship is weakened with a high level of the non-expert partner’s previous alliances and environmental dynamism. Our study offers important theoretical contributions to the signaling literature.
