Market Signaling Capability under Economic Uncertainty: Toward a Theory of Strategic Credibility Formation

Abstract

Economic uncertainty intensifies information asymmetry precisely when established market cues become less diagnostic, increasing external audiences’ dependence on organizational signals while making their interpretation more difficult. Although signaling research explains signal characteristics, credibility, and receiver responses, it offers a less developed account of why some firms are systematically better able to adapt signaling as informational conditions change. This article develops Strategic Credibility Formation Theory (SCFT), a middle-range theory centered on market signaling capability (MSC), by integrating signaling theory with dynamic capabilities, resource orchestration, sensemaking, attention, and managerial cognition. SCFT conceptualizes MSC as a repeatable capacity to sense changing information needs, select diagnostic cues, orchestrate consistent and behaviorally coherent signal configurations, and adapt them over time. The proposed recursive model explains strategic credibility as an evolving receiver judgment that accumulates, erodes, and may recover through repeated comparisons between signals, organizational conduct, and realized outcomes. The framework advances signaling theory from isolated signals toward capability, configuration, and temporal process, and establishes testable propositions for construct validation, longitudinal credibility updating, receiver heterogeneity, and cross-context empirical research.