Is the Grass Greener? Switching Costs and Geographic Proximity in the High Status Affiliations of Professional Baseball

Abstract

Professional baseball operates a tiered system of talent development facilitated by alliances between Minor League Baseball (MiLB) clubs and higher status Major League Baseball (MLB) parent teams. This study applies management theory to advance the literature on MiLB demand modeling by proposing and testing a new set of demand determinants based on interorganizational alliance principles. Team executives at the AA level should be alert to the high cost of switching team alliances and of changing to a parent club in closer geographical proximity. At the AAA level, affiliation with a winning MLB club exerts a positive effect on AAA demand.

Rebranding: the effect of team name changes on club revenue

“…A change in affiliation occurs when a MiLB team changes its parent MLB club. This change often marks a significant overhaul in the team's management, personnel, and coaching staff, and is associated with a negative switching cost (Agha & Cobbs, 2015). No researchers have investigated the effect of changing classifications in MiLB, but in alignment with similar shifts in leagues that utilize promotion and relegation (e.g., Noll, 2002) we expect a positive effect of changing to a higher classification and a negative effect of changing to a lower classification.…”

“…In the broader context of a strategic alliance, firms that change strategic partners often suffer switching costs that negate marginal gains from improved partnerships (Sarkar, Echambadi, & Harrison, 2001). For example, Agha and Cobbs (2015) found up to an 11% decrease in attendance when a MiLB team changed its affiliation with its MLB parent club. In the face of switching costs, a stable, local team name may be preferable to an unstable series of MLB names and can partially explain the trend of MiLB teams adopting local team names throughout the 1990s.…”

“…Specifically, based on our most current understanding of seasonal minor league demand modeling, team quality is measured by team win percentage, number of homeruns in a season, and the win percentage of the affiliated MLB team 3 (Agha & Cobbs, 2015;Gitter & Rhoads, 2010). A new minor league stadium has a strong positive effect on attendance for MiLB teams (Gitter & Rhoads, 2014), and is measured with a ten year honeymoon effect.…”

“…Substitutes were defined as the number of MLB teams in the Metropolitan Statistical Area (MSA) and a new MLB stadium built within the past five years. A new MLB stadium has been previously shown to increase attendance for teams in some MiLB classifications (Agha & Cobbs, 2015).…”

“…These data allow us to discern the market reaction (operationalized as attendance and merchandise sales) to different types of name changes, distinct from other changes such as new stadiums, changes in parent clubs, and/or changes in classifications. Finally, MiLB teams are affiliated (i.e., connected) to a MLB team through a two-or four-year Player Development Contract (PDC) that requires the MLB team to pay the salaries of the players and coaches, while the MiLB team provides the venue, parking, concessions, ticketing, and other fan services (Agha & Cobbs, 2015). This unique strategic alliance means that MiLB team owners do not control on-field activities, but rather focus on "what happens off the field and making it a great experience for the fans… [and] costumes are a big part of the show" (Wachter, 2010, para.…”