The economic limit on sporting success: how can football industry develop?

Abstract

Purpose: of the article is to develop recommendations for the development of football enterprises based on the study of the economic causes of the phenomenon of "overeinvestment" in the football industry.Methods: regression based on the Cobb-Douglas production function with data from the Russian Tax Service database as well as data of the Russian premier league (RPL) for 2018–2022. Results: football industry suffers extreme diseconomies of scale in persuade for sporting success unlike the most other industries. Success in RPL statistically significantly determined not only by labor costs but as well as by capital costs. At the same time, the elasticity of the league outcome to labor costs is somewhat lower than that of capital costs. By getting higher league standing by boosting costs a team enters on plateau of vanishing sporting gains. The predicted dependence of the performance in RPL based on costs pattern is very close to the actual data, including the economic limit of the maximum league outcome. Alongside the labor costs, other tangible and intangible factors are significant, especially for clubs with sustainable competitive advantage and better ability to sustain diseconomies of scale.Conclusions and Relevance: the root cause of overinvestment in football industry is the extreme diseconomies of scale, with other factors being consequences. The development of the industry is possible by combination of sporting and business performance by producing entertainment and information products. Sustainable advantage requires the development of intellectual capital, which improves returns and resilience to rising costs. It requires innovation to develop resources and capabilities of the football enterprise e.g. network capital and organizational know-how.