Contributions published at Strategic Management and Business Policy (Egon Franck)

We show that a combined bet at the bookmaker and at the bet exchange market yields a guaranteed positive return in 19.2% of the matches in the top five European soccer leagues. Moreover, we find that all considered bookmakers frequently offer arbitrage positions, and that they experience, on average, negative margins from these postings. Our findings indicate that bookmakers set prices not only by optimizing over a particular bet, but also by taking the future trading behaviour of their customers into account. We discuss the implications for the literature on the relationship between betting market structure and informational efficiency.

The paper presents estimation results on the size and loyalty of sport teams’ supporter groups in professional German football. Based on a novel two-stage estimation procedure, we find clear evidence for heterogeneity across teams. In the first stage, a random-utility model for a representative consumer is modelled and fitted to more than 1700 matches over the seasons 1996–2001. In the second step, attendance probabilities are predicted for the seasons 2002–2003 to estimate group sizes. A team's group size is positively correlated with its memberships (inline image.61; p<0.01), fan clubs (inline image.59; p<0.01) and merchandizing revenues (inline image.49; p<0.05). Noteworthy is that no similar correlations can be found for a team's home town population which has been the standard measure for market size in applied work so far.

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We show that professional soccer players exhibit reference-dependent behavior during matches. Controlling for the state of the match and for unobserved heterogeneity, we show on a minute-by-minute basis that a player breaches the rules of the game, measured by the referee’s assignment of cards, with a significantly higher probability if his team is behind the expected match outcome, measured by pre-play betting odds of large professional bookmakers. We derive these results in two independent data sets, one from ten seasons of the German Bundesliga, the other from eight seasons the English Premier League, each with more than half a million minutes of play.

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Ein unternehmensübergreifendes Verständnis von Organisation ist von zentraler Bedeutung. Denn es hat sich gezeigt, dass die Organisation des Unternehmensumfeldes, z. B. Wettbewerbspolitik, und die Organisation an den Grenzen der Unternehmung - z.B. Outsourcing, Kooperationen - erheblichen Einfluss auf den Erfolg und die Gestaltung von Unternehmensstrukturen haben. Das Lehrbuch wurde in der 5. Auflage aktualisiert und ergänzt um die Bereiche ?Dienstleistungs-?Service-Organisation? und ?Organisation von Wertschöpfung?.

We introduce agency concerns to social capital theory and predict that managers can use individual social capital to reduce personal effort costs, which is not in the best interest of the firm. To test this prediction, we collect data on all 8,019 hiring decisions from general managers in the National Basketball Association between 1981 and 2011. We find that managers have a clear preference for hiring players through social ties. The probability that a manager hires players from an NBA franchise to which he is socially tied is 27.6% higher than for an untied franchise. To isolate the motivation for this behavior, we complement our data with information on the sporting performance of teams. In line with agency theory, we find that the hiring of players through social ties reduces team performance. The effect is large: on average, each social-tie player reduces team winning percentage by 5.4%. Overall, this paper documents first empirical evidence that decision makers’ use of individual social capital can lead to reduced firm-level performance.

This paper provides non-experimental field evidence on positive and negative worker reciprocity. We analyze the performance reactions of professional workers to fair and unfair wage allocations in their natural environment. The objects of interest are professional soccer players in the German Bundesliga. This environment enables us to circumvent the main problems of observational studies on reciprocity because there is substantial transparency in individual player values and performance. Our main finding is that workers exhibit both positive and negative reciprocity toward employers who deviate from a player’s perception of a fair market wage. This perception of a fair wage follows from a Mincer-type wage equation that incorporates a worker’s past performance. The different results between changing and non-changing players are in line with theories of fairness perception but cannot be explained by private information from the employers or the personal career concerns of the players. Altogether, our findings provide strong evidence for the external validity of previous laboratory results on gift exchange in the labor market.

This paper explores the effect of dual-class shares on firm performance using a unique law change in Switzerland as a source of exogenous variation. Unlike most of the related literature we do not adopt a one-size-fits-all approach but allow the effect to vary depending on a firm’s need for external finance. Based on nine years panel data of both firms affected and unaffected by the law change, we find that dual-class shares neither harm nor benefit firm performance on average. However, dual-class shares increase firm performance if the firm requires external finance and dual-class shares decrease firm performance if the firm does not require external finance.

“Never change a winning team” is a well-known heuristic that recommends not altering the composition of successful teams. Using game-level observations of the highest German soccer league over a period of seven seasons, we find that the number of changes in the starting line-up is significantly lower after wins than after losses, taking suspensions and unobserved team heterogeneity into account. We show that teams of coaches who follow the heuristic do not win significantly more often, and that coaches significantly decrease the number of changes in the starting line-up even after wins caused by the exogenous home field advantage. These results provide first suggestive evidence that coaches may be influenced by behavioural concerns when following the heuristic to not change winning teams.

This paper analyzes the effects of a percentage-of-revenue salary cap in a team sports league with win-maximizing clubs and flexible talent supply. It shows that a percentage-of-revenue cap produces a more balanced league and decreases aggregate salary payments. Taking into account the idiosyncrasies of European football, our paper further highlights the potential conflicts between the league and society. From the perspective of a league governing body, a percentage-of-revenue cap always enhances financial stability of win-maximizing clubs. A social planner, however, will not permit the introduction of such a cap if fans and players unduly suffer. This paper shows under which conditions the social planner accepts (rejects) a salary cap proposed by the league regulator.

This paper develops a model of a professional sports league with network externalities by integrating the theory of two-sided markets into a two-stage contest model. In professional team sports, the competition of the clubs functions as a platform that enables sponsors to interact with fans. In these club-mediated interactions, positive network effects operate from the fan market to the sponsor market, while positive or negative network effects operate from the sponsor market to the fan market. We show that the size of these network effects determines the level of competitive balance within the league. If the market potential of the sponsors is small (large), competitive balance increases (decreases) with stronger combined network effects. We further deduce that clubs benefit from stronger combined network effects through higher profits and that network externalities can mitigate the negative effect of revenue sharing on competitive balance. Finally, we derive implications for improving competitive balance by taking advantage of network externalities. For example, our model suggests that an increase in the market potential of sponsors produces a more balanced league.

In order to avoid too many tied games after playing the five-minute overtime period, the National Hockey League (NHL) introduced two rule changes in the 1999-2000 season. First, a team that loses in overtime receives one point instead of zero points. Second, the number of skaters in overtime is reduced from five to four. The theoretical literature analyzing these rule changes predicted that they would also produce the unintended side-effect that more games would reach overtime and recommended that a team that wins in regulation should receive three points (instead of two) in order to counterbalance the converse effect. We are the first to empirically support this theoretical prediction using NHL data and data from Swiss ice hockey, in which the rule changes of the NHL were copied in the 2006-2007 season and in which the three-point rule was also introduced.