An explanation of economic impact: why positive impacts can exist for smaller sports

Abstract

Purpose – The purpose of this paper is to understand why some sports show a positive economic impact and other sports do not, and to identify a common set of explanatory factors explaining the differences. Design/methodology/approach – This explanatory research reviews the economic impact literature to identify the underlying conditions that would theoretically allow any sport, large or small, to generate positive economic effects. Findings – Nine conditions are identified that, when present, could allow a community to experience a positive economic impact from a team or stadium. These are then used to explain the discrepancy in known empirical outcomes in major and minor league baseball (MiLB). It appears as if major league teams are more likely to violate the conditions than minor league teams. This research finds theoretical support for previous suggestions that smaller teams and events may be beneficial to local economies. In doing so, it also explains previous empirical results that found some MiLB classifications are associated with positive gains in per capita income. Practical implications – Stakeholders can use the nine conditions to understand expected economic impact of their relevant sports. This research provides a comprehensive guide to understanding when economic impact can be positive. Social implications – This research helps explain some of the existing controversy regarding economic impact analysis. Originality/value – It is the first research to help provide a pre-set of conditions that can help predict whether positive economic impact will occur for specific sports teams or stadium projects.