A Resource-Utilization Model of Organizational Efficiency in Professional Sports Teams

Abstract

The resource-based view explains sustainable competitive advantage as the consequence of an organization’s endowment of unique and imperfectly replicable resources. Superior organizational performance, however, depends not only on the organization’s resource endowment but also on the efficiency with which the resource endowment is used. In this article a resource-utilization model of a professional sports team is developed in which teams optimize the stock of athletic resources (i.e., playing talent), subject to ownership preferences, over sporting and financial performance. The resource-utilization model is used to analyze the factors influencing the team’s current endowment of athletic resources and evaluate the efficiency with which teams utilize both their athletic and allegiance (i.e., fan base) resources to achieve sporting and financial targets. Empirical evidence is presented on the sporting and financial performance of English professional soccer teams in the FA Premier League over the period 1998-2002. It was found that the financial performance of teams is significantly affected by their ownership status.