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Evaluating the operational efficiency of NBA teams on franchise value: An assessment of data envelopment analysis

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  • Philsoo Kim
  • Sang Hyun Lee
  • JeongJun Moon

Abstract

The main purpose of this research is to empirically analyze the determinants of organizational performance using National Basketball Association (NBA) team data. Based on the resource-based theory of the firm, prior studies posit that operational efficiency encompasses the ability of professional sports teams to translate their resources into creating organizational performance. The contention is that NBA teams enhance organizational performance in the market when possessing valuable, rare, inimitable, and non-substitutable resources and capabilities. In this sense, the operational efficiencies of NBA teams align with the concept of core competence, enabling teams to achieve competitive advantages through superior performance. The exploration of the level of operating efficiency in NBA teams and its role in organizational performance is beyond essential. This study conceptualizes operating efficiency as the degree of competence exhibited by professional sports teams, drawing on comprehensive game-related statistics and financial performance data derived from human assets and team budgets. To bridge theory and empirical investigation, data spanning six seasons (2015–2016 to 2020–2021) for all 30 NBA teams were collected. The results reveal that 29 out of 180 decision-making units exhibit outstanding organizational efficiency, significantly contributing to franchise value.

Suggested Citation

  • Philsoo Kim & Sang Hyun Lee & JeongJun Moon, 2024. "Evaluating the operational efficiency of NBA teams on franchise value: An assessment of data envelopment analysis," PLOS ONE, Public Library of Science, vol. 19(3), pages 1-18, March.
    • Handle: RePEc:plo:pone00:0297797
    DOI: 10.1371/journal.pone.0297797
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    References listed on IDEAS

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    1. Plácido Moreno & Sebastián Lozano, 2014. "A network DEA assessment of team efficiency in the NBA," Annals of Operations Research, Springer, vol. 214(1), pages 99-124, March.
    2. Carlos Pestana Barros & Stephanie Leach, 2006. "Performance evaluation of the English Premier Football League with data envelopment analysis," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1449-1458.
    3. Chih-Hai Yang & Hsuan-Yu Lin & Chiang-Ping Chen, 2014. "Measuring the efficiency of NBA teams: additive efficiency decomposition in two-stage DEA," Annals of Operations Research, Springer, vol. 217(1), pages 565-589, June.
    4. Quinn Keefer, 2021. "Sunk costs in the NBA: the salary cap and free agents," Empirical Economics, Springer, vol. 61(6), pages 3445-3478, December.
    5. Tim R. Holcomb & R. Michael Holmes Jr. & Brian L. Connelly, 2009. "Making the most of what you have: managerial ability as a source of resource value creation," Strategic Management Journal, Wiley Blackwell, vol. 30(5), pages 457-485, May.
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