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Talent Recruitment and Firm Performance: The Business of Major League Sports

  • Daniel H. Weinberg

Firms rely heavily on their investments in human capital to achieve profits. This research takes advantage of detailed information on worker performance and confidential information on firm revenue and operating costs to investigate the relationship between talent migration and firm profitability in major league sports. One key problem that firms have is identifying performance measures for its workforce, especially for potential employees (recruits). In contrast to nearly all other industries, in the industry of professional team sports, detailed information about the past performance of each individual worker (athlete) is known to all potential employers. First, I demonstrate using public data that worker (athlete) statistics aggregated to the establishment (team) level correlate with success on the field (measured in win percentage). Second, I use confidential data from the 2007 Economic Censuses, and from the 2007 and 2008 Service Annual Surveys to investigate the link between individual worker performance and team profitability, controlling for many other aspects of the sports business, specifically taking account of the mobility of athletic “stars” and “superstars” from one team to another. The investigations in this paper provide support for the hypothesis that hiring talented individuals (stars) will increase a firm’s profit. However, there is not convincing support for the incremental benefit of hiring superstars. The mixed evidence suggests a benefit on balance.

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File URL: ftp://ftp2.census.gov/ces/wp/2013/CES-WP-13-54R.pdf
File Function: First version, 2013
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 13-54r.

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Length: 38 pages
Date of creation: Nov 2013
Date of revision: Feb 2014
Handle: RePEc:cen:wpaper:13-54r
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  1. Egon Franck & Stephan Nüesch, 2012. "Talent And/Or Popularity: What Does It Take To Be A Superstar?," Economic Inquiry, Western Economic Association International, vol. 50(1), pages 202-216, 01.
  2. Lynne G. Zucker & Michael R. Darby & Maximo Torero, 1997. "Labor Mobility from Academe to Commerce," NBER Working Papers 6050, National Bureau of Economic Research, Inc.
  3. Thomas N. Hubbard, 2009. "Specialization, Firms, and Markets: The Division of Labor within and between Law Firms," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(2), pages 339-371, October.
  4. Glenn, Andrew & McGarrity, Joseph P & Weller, Jim, 2001. "Firm-Specific Human Capital, Job Matching, and Turnover: Evidence from Major League Baseball, 1900-1992," Economic Inquiry, Western Economic Association International, vol. 39(1), pages 86-93, January.
  5. Timothy Dunne & Shawn D. Klimek & Mark J. Roberts & Yi Xu, 2007. "The dynamics of market structure and market size in two health services industries," Working Paper 0712, Federal Reserve Bank of Cleveland.
  6. Frank Limehouse & Robert McCormick, 2011. "Impacts of Central Business District Location: A Hedonic Analysis of Legal Service Establishments," Working Papers 11-21, Center for Economic Studies, U.S. Census Bureau.
  7. Hausman, Jerry A & Leonard, Gregory K, 1997. "Superstars in the National Basketball Association: Economic Value and Policy," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 586-624, October.
  8. Arzaghi Mohammad & Berndt Ernst R. & Davis James C. & Silk Alvin J., 2012. "The Unbundling of Advertising Agency Services: An Economic Analysis," Review of Marketing Science, De Gruyter, vol. 10(1), pages 1-55, December.
  9. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," NBER Working Papers 13653, National Bureau of Economic Research, Inc.
  10. Boris Groysberg & Linda-Eling Lee & Ashish Nanda, 2008. "Can They Take It With Them? The Portability of Star Knowledge Workers' Performance," Management Science, INFORMS, vol. 54(7), pages 1213-1230, July.
  11. Casey Ichniowski & Anne E. Preston, 2012. "Does March Madness Lead to Irrational Exuberance in the NBA Draft? High-Value Employee Selection Decisions and Decision-Making Bias," NBER Working Papers 17928, National Bureau of Economic Research, Inc.
  12. Adler, Moshe, 1985. "Stardom and Talent," American Economic Review, American Economic Association, vol. 75(1), pages 208-12, March.
  13. Camilla Lenzi, 2009. "Patterns and determinants of skilled workers' mobility: evidence from a survey of Italian inventors," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 18(2), pages 161-179.
  14. Daniel, Rascher, 2008. "Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues," MPRA Paper 25809, University Library of Munich, Germany.
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