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THE EFFECT of ENVIRONMENTAL FACTORS on FRANCHISE SUCCESS in the NBA's DEVELOPMENT LEAGUE: an APPLICATION of ORGANIZATIONAL THEORY Margaret Keiper

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THE EFFECT of ENVIRONMENTAL FACTORS on FRANCHISE SUCCESS in the NBA's DEVELOPMENT LEAGUE: an APPLICATION of ORGANIZATIONAL THEORY Margaret Keiper University of New Mexico UNM Digital Repository Health, Exercise, and Sports Sciences ETDs Education ETDs 9-12-2014 THE EFFECT OF ENVIRONMENTAL FACTORS ON FRANCHISE SUCCESS IN THE NBA'S DEVELOPMENT LEAGUE: AN APPLICATION OF ORGANIZATIONAL THEORY Margaret Keiper Follow this and additional works at: https://digitalrepository.unm.edu/educ_hess_etds Recommended Citation Keiper, Margaret. "THE EFFECT OF ENVIRONMENTAL FACTORS ON FRANCHISE SUCCESS IN THE NBA'S DEVELOPMENT LEAGUE: AN APPLICATION OF ORGANIZATIONAL THEORY." (2014). https://digitalrepository.unm.edu/educ_hess_etds/18 This Dissertation is brought to you for free and open access by the Education ETDs at UNM Digital Repository. It has been accepted for inclusion in Health, Exercise, and Sports Sciences ETDs by an authorized administrator of UNM Digital Repository. For more information, please contact [email protected]. Margaret C. Keiper Candidate Health, Exercise and Sport Sciences Department This dissertation is approved, and it is acceptable in quality and form for publication: Approved by the Dissertation Committee: Dr. John Barnes, Chairperson Dr. James Selig Dr. Todd Seidler Dr. Sul Kassicieh i THE EFFECT OF ENVIRONMENTAL FACTORS ON FRANCHISE SUCCESS IN THE NBA'S DEVELOPMENT LEAGUE: AN APPLICATION OF ORGANIZATIONAL THEORY by MARGARET C. KEIPER B.A., Mathematics, Lakeland College, 2008 B.S., Business Administration, Trine University, 2008 B.A., Marketing, Lakeland College, 2009 M.B.A, Business Administration, Lynn University, 2011 DISSERTATION Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Physical Education, Sports and Exercise Science The University of New Mexico Albuquerque, New Mexico July, 2014 ii DEDICATION This dissertation is dedicated to the precious memories of Janette and Robert Keiper. Your unconditional love, even after both of you were gone, is what kept me dedicated to this endeavor. I am thankful for the endless encouragement both of you showed to me in the pursuit of all my goals. You both taught me to operate with high character, work hard at everything I do, and to appreciate the great outdoors. Despite the infinite lessons I learned from the both of you, the thing I am most grateful for is to have been able to call you "Mom and Dad". I am forever indebted and you are eternally in my heart. iii THE EFFECT OF ENVIRONMENTAL FACTORS ON FRANCHISE SUCCESS IN THE NBA'S DEVELOPMENT LEAGUE: AN APPLICATION OF ORGANIZATIONAL THEORY by Margaret C. Keiper B.A., MATHEMATICS, LAKELAND COLLEGE, 2008 B.A., MARKETING, LAKELAND COLLEGE, 2009 B.S., BUSINESS ADMINISTRATION, TRINE UNIVERSITY, 2008 M.B.A., LYNN UNIVERSITY, 2010 PH.D., SPORTS ADMINISTRATION, UNIVERSITY OF NEW MEXICO, 2014 ABSTRACT In 2001 the National Basketball Association (NBA) formed its own minor league: The National Basketball Development League (D-League). The D-League was originally designed as a vertical extension of the NBA and to act as a farm-system for the NBA. There has been instability in the make-up of the teams within in the D-League since the inception of the League. Instability is a shared characteristic among all minor league basketball operations. However, unlike its minor league counterparts, the D-League has promise to endure long-term. In this study, external environmental factors that are linked to competition, demographics and structure are analyzed. Organizational theory takes into account the role of the external environment in regards to the survival of a new firm. Factors analyzed were: market size, per-capita income, market education, presence of other professional sports teams, presence of NCAA Division I men’s collegiate basketball teams, stadium location, stadium age, stadium ownership, the number of large businesses within the market place, and business ownership model were all considered. iv TABLE OF CONTENTS LIST OF FIGURES………………………..………………………………….….…..viii LIST OF TABLES………………………………………………..………………...…..ix CHAPTER I – INTRODUCTION…………………………………….………………..1 Research Problem…………………………………………………………………3 Purpose Statement ……..…………………………………….……………………3 Justification for Research………………………………………….…………........4 Deficiencies in Evidence……………………………………….………………….6 Theoretical Framework …………………………………………….……………..7 Research Questions………………………………….…………………………...10 Hypotheses……………………………….……………………………………....11 Significance of Study and Audience …………….………………………………11 Delimitations……………………………………………………………………..12 Limitations……………………………………………………………………….13 Assumptions……………………………………………………………………...13 Definition of Terms………………………………………………………………13 CHAPTER II – LITERATURE REVIEW The Professionalization of Basketball..….............................................................16 The D-League…………………………………………...……….………………21 Strengthening the Relationship………….……………………………….23 A Competitive Advantage……………….………………………………25 Hesitance for Expansion……..…............….…………………………….27 Implications of Growth………………….……………………………….26 v The Character of Minor League Basketball……………….……………..………30 Shared Characteristics……….…….…….……………………………….32 The Difference of the D-League…………………………………………36 New Firm Survival……………………………………………………………….37 Importance of the Environment…………………...……………………..40 Legitimacy…………………………………………………...…………..41 Theoretical Framework…………………………………………………….…….44 Factors That Attribute to Franchise Success…………..………………………....48 Facility Age………………………………………………………………53 Facility Location…………………………………………………………54 Facility Ownership…....………………………………………………….56 Facility Size……………………………………………………...………57 Market Population………………………………………………………..57 Per-capita Income of Market…………………………………………….58 Market Education Level……………………...…….………………….....60 Market Competition….…………………………………………………..60 Business Structure……………………………………………………….64 Large Businesses in the Market…………………………………………65 CHAPTER III – METHODOLOGY…………………………………………………67 Research Design…………………………………………………………………67 Data Source and Study Rationale………….…………………………………….68 Power Analysis…………………………………………………………..67 vi Data Assembly…………………………………….……………………..72 Team Market……………..……………………………………….……..74 Measuring Attendance…………………………..……………………....74 Research Question 1: Market Demographics……..……………………..76 Research Question 2: Facility Characteristics……..………………...…..77 Research Question 3: Structure, Competition,& Large Business…..……79 Data Analysis…………………………………………………………………….81 Assumptions…………………………………………………….………..82 Limitations……………………………………………………………….84 CHAPTER IV - RESULTS……………………………………..…………...…………85 Data Analysis Procedures………………………………………………………..85 Research Question 1 – Market Demographics…………………………………..87 Research Question 2 – Facility Characteristics……………………………...…..90 Research Question 3 – Ownership Model, Competition, Businesses…………....93 CHAPTER V - CONCLUSION……………….……………………………………….98 Summary of the Study……………………….…………………………………..98 Implications of Results…………………………………………………………..99 Future Direction………………………………………………………………...104 REFERENCES………………………………………………………………….…….106 vii LIST OF FIGURES Figure 1.1. Proposed Framework…………….…………………………………………..7 Figure 1.2: Value Creation Within a Professional Sports Organization ……….……….10 Figure 2.1. Value Creation within an Organization……………………………………..45 Figure 2.2. Factors of a Sports Organizations Environment………………………...….47 viii LIST OF TABLES Table 2.1. Number of teams in the D-League per year…………………….…………….25 Table 2.2. Exit and Survival Rates for Minor League Basketball Teams 2010 – 2012…31 Table 2.3. Exit Rate Percentiles by year for the D-League ..…………………...………39 Table 2.4. All D-League teams, years of operation, and status as of 2012………………42 Table 2.5. Summary of Literature: Environmental Factors Affecting Success…..…...…50 Table 3.1. Predictors……………………………………………………………………..68 Table 3.2. Names and Locations of D-League Teams………………………………...…72 Table 3.3. Source of Data Table…………………………………………………………73 Table 4.1 Sample Information and year of Data Considered……………………………86 Table 4.2 Descriptive Statistics for Demographic Characteristics………………………87 Table 4.3 Diagnostics: Demographic Predictors of Attendance Capacity in the D- League……………………………………………………………………………90 Table 4.4 Descriptive Statistics for Facility Characteristics..……………………………91 Table 4.5 Diagnostics: Facility Predictors of Attendance Capacity in the D-League...…93 Table 4.6 Descriptive Statistics for Resource Characteristics…...………………………94 Table 4.7 Diagnostics: Resource Predictors for Attendance Capacity in the D-League...97 Table 5.1 Proposed Cities for Future D-League Expansion……...…………………....103 ix CHAPTER I. INTRODUCTION The economics and characteristics of professional sports teams have been historically referred to as being unique compared to other industries (Cairns, Jennett, and Sloan, 1986, p. 4). Monopolistic practices, territorial rights in predetermined markets, depreciation of player contracts, and other factors have all been considered to be distinctive to professional sport. However, not all of the economic characteristics of professional sports are unique in comparison to other industries – especially the attributes of minor league basketball. Difficulty to endure and high mortality rate are prime examples of the shared struggles that nearly all industries face. High mortality makes minor league basketball organizations not-so-unique to the difficulties of new firm survival and reveals the lack of peculiarity in the economics of minor league basketball compared to other industries. Within the minor league basketball market place there are always numerous leagues competing for the sports entertainment dollar. For example,
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