What Makes Non-Profit Soccer Teams Run? a Panel Data Approach Using a Sample Of
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FINANCIAL THEORY AND PAULO REIS MOURÃO, CÉSAR COSTA CIMA: PRACTICE WHAT MAKES NON PROFIT SOCCER TEAMS RUN? A PANEL DATA APPROACH USING A SAMPLE OF - 199 36 (2) 199-220 (2012) BRAGA TEAMS * * ** 4 O Ã [email protected] Received: July 1, 2011 The authors are indebted to three anonymous referees who provided valuable suggestions on a previous soccer teams run? teams soccer kindly provided some of the data used in this research. doi: 10.3326/fintp.36.2. doi: Master Course on Social Economics, University of Minho, Alvaro Rua Dória nº45 6ºesquerdo, 4700 Braga, Portugal Paulo Reis MOUR Department of Economics, Economics & Management School, University of Minho, Rua Alvaro Dória nº45 Dória Alvaro Rua Minho, of University School, Management & Economics Economics, of Department César Costa CIMA e-mail: e-mail: [email protected] CÉSAR COSTA CIMA, Bachelor CÉSAR COSTA Preliminary communication Preliminary UDC: 336 UDC: version of this paper. They are also indebted to Jorge Monteiro (AFB, Associaçao de Futebol de Braga) who Monteiro (AFB, They are also indebted to Jorge version of this paper. 6ºesquerdo, 4700 Braga, Portugal Accepted: November 24, 2011 using a sample of Braga Braga of sample a using PAULO REIS MOURÃO, PhD PAULO JEL: L31, L83, O18 L83, L31, JEL: teams ** * A panel data approach data panel A What makes non-profit non-profit makes What - - - - - - - - e role of specific determinants of the competitiveness the of determinants specific of role e tionship between socioeconomic development and soccer teams soccer and development socioeconomic between tionship INTRODUCTION rature related to factors involved in the competitiveness of professional th analyzes 3 Section teams. sports of non-profit soccer teams. Section 4 discusses the econometric model, our data and analyzes and debates the results. In Section 5, conclusions are presented. terminants of the sustainability and competitiveness of amateur and non-profit soccer teams in the Braga (a Portuguese region) Soccer League. In this work, we test several hypotheses regarding how economic conditions and local institutions influence the competitiveness of these non-profit soccer teams. The paper is structured into five sections. Section 2 contains a review of the lite ship because amateur teams are characterized by their low level of expenditures and a small, local, average-sized audience at their matches. Although the recent literature on the financial sustainability and sporting compe titiveness of professional teams is substantial, there have been Therefore, in this work we wantamateur and to non-profit analyze the sports. de few studies on On any given weekend in Portugal, for each match played between two professio two between played match each for Portugal, in weekend given any On between played matches (official) thirty approximately are there teams, soccer nal invol supporters and coaches, managers, players, of numbers The teams. amateur ved are proportional to the number of matches. However, when we focus on the value-added, computed value of expenditures, or number of fans present at each relation inverse an often is there fact, In proportionality. this find not do we match on very specific periods. The current literature also centres primarily on professio on primarily centres also literature current The periods. specific very on are nal analyzing sports. We the non-profit sports industry; therefore, we have to pay special attention to dimensions that usually are not relevant for professional sports, such as the role of institutions, local dynamics and the support of a few very active members. Interest in the rela the in Interest num the or size population as such Factors scientists. social among increased has ber of teams present in a region strongly influence the performance ofsports community. a given concentrate and cases national on focused mainly have studies previous However, depend on specific local markets and on the institutional environments of non- organizations. profit regional institutions soccer, organizations, non-profit Keywords: 1 Abstract Amateur regionalsoccer influenced local factorsteams by and from are different soccer professional teams. This article the revisits on literature the determinants of soccer performance and the sustainability of non-profit organizations. Using panel data techniques, we conclude that the outcomes of soccernon-profit teams FINANCIAL THEORY AND PAULO REIS MOURÃO, CÉSAR COSTA CIMA: PRACTICE WHAT MAKES NON-PROFIT SOCCER TEAMS RUN? A PANEL DATA APPROACH USING A SAMPLE OF BRAGA 36 (2) 199-220 (2012) TEAMS 200 2 THE COMPETITIVENESS OF SPORTS TEAMS: A REVIEW 201 OF THE LITERATURE According to “classical theories” of development, regional development exerts an exogenous influence through linkages to economic activity and society (Oliveira and Lima, 2003). One of the activities affected by regional development is sports. 36 (2) 199-220 (2012) PRACTICE FINANCIAL The most expensive, ambitious and powerful sports organizations and clubs need THEORY strong infrastructure and good economic support to sustain their operations (Mou- rão, 2010). This type of infrastructure and support can only be found in places AND with strong development indices. In this context, Coates and Humphreys (2008) highlight the importance of subsi- dies to the mobility of sports clubs; as an example, they point to the Seattle Super- BRAGA WHAT PAULO sonics, an NBA team that changed its host city. The Seattle Supersonics were MAKES REIS dissatisfied with their former home, Key Arena, and sought to convince the city of TEAMS MOUR NON Seattle to build a new pavilion. Ã - PROFIT O , , CÉSAR Those responsible for examining the application refused to grant a new arena to SOCCER the team, which led to termination of the contract between the team and the city. COSTA TEAMS It was then that Oklahoma City decided to court the Supersonics with a promise CIMA : to subsidize a new $100 million stadium and a $20 million training centre. The RUN offer convinced the team to move from Seattle. ? A PANEL Hoffmann et al. (2003) also argue that sports development is intertwined with the DATA existence of better infrastructure and increased financial incentives for engaging APPROACH in or sponsoring sports-related activity. USING Scholars such as Downward and Dawson (1999) point to the importance of school A attendance patterns and consumption habits as factors in the development of soc- SAMPLE cer, while Gartner and Pommerehne (1978) highlight the importance of a region’s OF socio-economic institutions in such development. Regarding the importance of institutions, Eric Besson (2008) writes that a well-regulated sport without legal uncertainties is important for conveying a good image of a league, which reinfor- ces the league’s attractiveness. If these effects are evident in sporting activity in general, they are revealed more clearly in activities such as football, which, according to Halicioglu (2006), is the most-played team sport in the world. It also moves the most money worldwide. Portuguese football/soccer must also be placed in this context. According to Mar- co Vaza, in “Portugal is still almost a country of soccer,” published in Publico (29/12/2010); football is by far the most-played sport in Portugal, accounting for almost one-third of federally-funded sport participants. It also produces the most revenue. However, most Portuguese local and regional (district) soccer leagues - - - - - - - - - . 1 The following section will explain why we consider the football clubs that we observed to be third sector also has an important spatial dimension, arguing that localities and regions are the are regions and localities that arguing dimension, spatial important an has also The case of Portuguese products soccer of clearly reflectstheir thishistories. rea 1 entities. sing power of the population, it becomes very clear that the “richest supporters or supporters “richest the that clear very becomes it population, the of power sing areas ... can leverage more assistance and more revenue” (Mourão, 2005). theory of central places (1933), the In level of line demand with in Christaller’s a given area will initially determine importance a and team’s will subsequently in fluence its growth.Vasquez Barquero (1995) adds that economic development Downward and Dawson (1999) argue that the matches factors for responsible teams are for divided into finding two groups: sporting factors and wea televised, is event an whether quality, team include factors Sporting factors. economic ther conditions and the uncertainty of results. Economic factors include team en vironment, spectatorship purchasing power and ticket prices. If much of a team’s purcha the on depends this and revenue, ticket club’s that from derived is revenue nues for sports clubs. In addition, and according to Breuer (2009), the demand for demand the (2009), Breuer to according and addition, In clubs. sports for nues once increases, city a in teams of number the as increases games football to tickets again reinforcing the importance of rivalry between local teams (e.g. derbies, in which two local teams compete directly). of the interaction of physical distance between two teams, their proximity to other to proximity their teams, two between distance physical of interaction the of tourist attractions, interest in a game and the quality of the opponents. In studies on college American football, Price and Sen (2003) conclude that the quality of rival teams, the spirit of rivalry and within-conference competition po sitively influence the size of spectatorship, a thus game’s generating higher reve bank debt (Mourão, 2005). determine that factors two identifies (2005) Leonard revenues, ticket to relation In the of model “gravity the adopts Leonard extent. lesser or greater a to variable this social sciences,” which posits that there is a force of attraction between two pla function a are costs These them. between interaction of cost the by influenced ces, football teams depend on the divisions in which the teams play and include the costs of salaries, maintenance of infrastructure, and movements of personnel and investments.