Signaling and
organization theory:
how formality works beyond the
contract
Hendrik Vollmer & Thomas Hoebel
Bielefeld University
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Introduction
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Introduction
Aims of the paper
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Introduction
Aims of the paper
Overview
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Introduction
Aims of the paper
Overview
Disclaimer
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of
formal organization
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of
formal organization
What is the theory of formal organization trying to
accomplish?
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of
formal organization
What is the theory of formal organization trying to
accomplish?
What exactly is “formal“ about formal organization?
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of
formal organization
What is the theory of formal organization trying to
accomplish?
What exactly is “formal“ about formal organization?
And (how) does formality work, after all?
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Spence on job market signaling
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Employers’ beliefs about
productivity given education
levels
Empirical joint distribution of
productivity and education in
the market – discovered after
hiring
Wages offered to education
levels by employers
The flow of interrelationships in the job
market signaling model (Spence 1974:
17)
Choice of levels of education
Costs of education
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Spence on job market signaling
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Spence on job market signaling
Gambetta on recruiting criminals
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Spence on job market signaling
Gambetta on recruiting criminals
Varieties of types, varieties of organizations
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Signaling commitment to membership status
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Members' beliefs about status
commitments given specific
contributions
Empirical joint distribution of
status commitments and
contributions
Status offered to contributions
Choice of contributions
Opportunity costs minus
benefits of membership status
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Signaling commitment to membership status
Joint distributions of status commitments and
contributions
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Signaling commitment to membership status
Joint distributions of status commitments and
contributions
Stable beliefs that contributions signal commitment
to membership status
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Members' beliefs about status
commitments given specific
contributions
Empirical joint distribution of
status commitments and
contributions
Status offered to contributions
Choice of contributions
Opportunity costs minus
benefits of membership status
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Correlated coordination of formal
directives and contributions
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Correlated coordination of formal
directives and contributions
Symbolizing joint distributions: contracts, rules,
guidelines, offices, etc.
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Correlated coordination of formal
directives and contributions
Symbols representing
members' beliefs about status
commitments: contracts,
guidelines, charts, job titles,
stories, etc.
Choice of formal directives
Choice of contributions
Opportunity costs minus
benefits of membership status
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Correlated coordination of formal
directives and contributions
Symbolizing joint distributions: contracts, rules,
guidelines, offices, etc.
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Correlated coordination of formal
directives and contributions
Symbolizing joint distributions: contracts, rules,
guidelines, offices, etc.
How formal directives work
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Correlated coordination of formal
directives and contributions
Symbolizing joint distributions: contracts, rules,
guidelines, offices, etc.
How formal directives work
The evolution and devolution of formality
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Correlated coordination of formal
directives and contributions
Symbols representing
members' beliefs about status
commitments: contracts,
guidelines, charts, job titles,
stories, etc.
Choice of formal directives
Choice of contributions
Opportunity costs minus
benefits of membership status
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
Members' beliefs about status
commitments given specific
contributions
Empirical joint distribution of
status commitments and
contributions
Status offered to contributions
Choice of contributions
Opportunity costs minus
benefits of membership status
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
From status market signaling to
contract-correlated coordination
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
From status market signaling to
contract-correlated coordination
Conclusions/tasks
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
From status market signaling to
contract-correlated coordination
Conclusions/tasks
Two sets of signals in every
formal organization:
contributions signaling
commitment to
membership status &
vocabularies of formal
directives
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
From status market signaling to
contract-correlated coordination
Conclusions/tasks
Two sets of signals in every
formal organization:
contributions signaling
commitment to
membership status &
vocabularies of formal
directives
Differentiating
organizational forms
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012
Signaling and organization theory:
how formality works beyond the contract
Persistent problems in the theory of formal organization
Signaling in membership recruitment
Membership status signaling
From status market signaling to
contract-correlated coordination
Conclusions/tasks
Two sets of signals in every
formal organization:
contributions signaling
commitment to
membership status &
vocabularies of formal
directives
Differentiating
organizational forms
Integrating qualitative
and quantitative studies
of organizing
New Developments in Signaling and Game Theory: Model Building, Applications, and Empirical
Corroborations. Monte Verità, October 18th, 2012