Theory plays a fundamental role in scientific research and discipline development. However, theory development in management discipline has experienced a rather slow progress among the last 30 years. The present study concludes that the current problems to some extent stem from an inappropriate understanding of theory. In the process of scientific development, the mission of theory is to correctly explain and predict the research object, and provide guidance to related social practices. With respect to the nature of theory, this paper adopts Hempel’s definition of theory. Our literature review indicates that mainstream management literature has widely misunderstood the nature of theory. Accordingly, the theoretical contributions in academic studies are not sufficient to promote the development of management discipline. In conclusion, with intention to advance theory development, the management community needs to correctly understand the mission and nature of scientific theory. Implications on developing management theory are discussed at the end of this paper.