The Effects of Homegrown Rule on Efficiency of Sports Teams: Evidence from the English Premier League

Abstract

In the sports industry, governing bodies often have regulations for political and societal purposes. Despite their well-meaning intentions, the regulations often tend to be detrimental to stakeholders, including players and sports clubs. This study investigates the impact of the Football Association’s homegrown regulation on the operational efficiency of football clubs in the English Premier League (EPL). Using data envelopment analysis, we calculate the efficiency scores of 10 EPL clubs and compare them before and after the implementation of the regulation. Our results show that the efficiency of EPL football clubs decreased after the regulation was implemented, supporting the adverse effects of the homegrown rule. Our results further reveal that clubs were affected by the regulation to varying degrees. The distinct patterns of efficiency score changes in some clubs are explained by their unique managerial circumstances, such as ownership changes. Compliance costs, which vary depending on the level of each club’s youth academy system, also moderate the impact of the regulation. The findings of this study imply that imposing homegrown regulation on clubs unanimously without considering clubs’ different conditions leads to operational inefficiencies, generating adverse effects. This study has rich implications with respect to the productivity management of team sports. It also provides deep insights for the governing bodies trying to develop better policies. Funding: This work was supported by an Incheon National University Research Grant in 2021.