Sports Economics and Management of Asian Sports Business

Abstract

Asian countries have emerged as an important player in international sport business. In particular, China, Japan, and Korea are frequent hosts of the Olympics, FIFA World Cup, and other international mega sports events. At the same time, their domestic sports industries also have grown consistently. However, Asian sports business remains relatively remote from the in-depth research occurring in Western contexts in the field of sports economics and management. In response to this, this special issue helps to push forward the examination of Asian sport business from economic, financial, and managerial perspectives. Specifically, this special issue examines: the impact of foreign player policies on competitive balance, the relationship between wage dispersion and team performance, the relationship between consumer demand and international events, as well as the development of sport facilities across China.

亚洲体育经济与管理

亚洲国家已成为国际体育事业的重要参与者。特别是, 中国、日本和韩国经常举办奥运会、世界杯足球赛和其他国际大型体育赛事。与此同时, 中国国内体育产业也在持续增长。然而, 亚洲体育商业与西方体育经济与管理领域的深入研究相比, 仍然相对较远。为此, 本期特刊将从经济、金融和管理的角度推动对亚洲体育商业的研究。具体来说, 本期特刊考察了外国球员政策对竞争平衡的影响, 工资差距与球队表现的关系, 消费者需求与国际赛事的关系, 以及中国体育设施的发展。

Keywords:

• Sports economics
• Asian sports industry
• competitive balance
• wage disparity
• consumer demand

关键词:

• 体育经济学
• 亚洲体育产业
• 竞争平衡
• 工资差距
• 消费者需求

1. Introduction

Following long-term economic growth, East Asian countries have emerged as important markets for international sports business and events. In particular, China, Japan, and Korea are frequent hosts of the Olympics, FIFA World Cup, and other international sporting events of varying sizes and scopes. Their domestic sports industries also have grown consistently over the past several decades. Notably, professional leagues of baseball, football (soccer), basketball, and volleyball have all grown and become important parts of the sport industry in both quantitatives and qualitative aspects. Likewise, the golf industry throughout Asia has become highly competitive as well. At the same time, professional leagues in Asia have similar structures to those in North American and European leagues, but there are also distinctively different characteristics such as governance structure. Particularly, professional sports franchises in East Asia are generally supported financially by large conglomerates, and thus may have different business objectives from those in the Western sports leagues. That is, whereas sport teams in other parts of the world may have to be focused on profit maximizing to some extent, many Asian sport teams are seen as subsidiaries of major corporations that are expected to operate with financial losses. Despite the unique aspects of Asian sports business, there remains relatively few studies in sports economics and management which have attempted to empirically study the industry in this region.

This special issue includes four studies on Asian sports business. It considers a number of topics that are important in both the everyday operations of sport in Asia, as well as it continued future growth. Additionally, the studies within this issue also play an important role in helping to advance the theoretical and empirical understanding of sport. Though the studies occur within the context of Asia, their findings also connect to research conducted in other regions. Specifically, the research in this special issue examines: the impact of foreign player policies on competitive balance, the relationship between wage dispersion and team performance, the relationship between consumer demand and international events, as well as the development of sport facilities across China. In this sense, the subjects in this issue range from micro-level decision making for sport teams, all the way to national level policies for sport in one of the world’s largest economies.

2. Foreign Player Restriction and Competitive Balance in Chinese Basketball Association

The first paper in this issue by Gong, Watanabe, Brown, and Nagel (2018) examines the relationship between regulations and competitive balance in the Chinese Basketball Association (CBA). In particular, it focuses on the impact of the adoption of the Asian-born player policy on competitive balance. CBA allows for two foreign players on roster per a team. In addition, it also allows the bottom four to six teams and expansion teams for an additional foreign player who is an Asian player born outside of China. The purpose of this Asian-born player policy is clear: enhancement of competitive balance. Therefore, this paper belongs to the studies focused on the relationship between the size of talent pool and competitive balance of which empirical results are mixed. For example, Binder and Findlay (2012) present the empirical results of no relationship, while Schmidt and Berri (2003) argue that global search of playing talent helps to improve competitive balance.

Along these lines, this paper is the first attempt to focus on the case of an Asian sports league in this area of research. In fact, the CBA is not the only league in Asia that utilizes foreign player policy as a controlling tool for competitive balance. For example, the Korea Baseball Organization (KBO) also has limited the number of foreign players on roster at three, but has allowed an additional foreign player to expansion teams for three years. This extra quota policy intends to foster expansion teams and maintain competitive balance in a reasonable range. Therefore, the foreign policy which assign different access to foreign playing talent across different teams is common in Asian sports leagues, but unique globally. This study adds not only to the literature of the effects of regulations affecting playing talent pool on competitive balance, but also derives policy implications which help relative young leagues such as CBA to find optimal regulation structure.

3. Managerial Efficiency in Korean Baseball Organization

The second paper in this issue by Jang (2018) considers the relationship between salaries and performance by teams in the KBO League in South Korea and Major League Baseball (MLB) in North America. Notably, this research builds on prior research that has examined professional baseball in Korea (Jang & Lee, 2016; Lee, 2006). However, this study makes important contributions in that previous sport research in Asia has provided little to no consideration of salaries, and the role that they may play on team performance. As prior research on Korean baseball has primarily examined consumer demand (Lee, 2006) and competitive balance within the KBO League (Lee, Jang, & Fort, 2016), this study helps to advance the research in this context.

Additionally, the work by Jang (2018) also needs to be noted for its analysis of the distribution of wages, a topic which has garnered a great deal of consideration in the management (Pfeffer, 2010), economics (Coşar, Gunner, & Tybout, 2016), and sport literature (Coates, Frick, & Jewell, 2016) in recent years. Within the research on wage distribution, the main point of analysis has been in examining how salaries are distributed across an organization, and whether having unequal pay for employees impacts the performance of individuals and the corporation as a whole. Moreover, studies on wage distribution also consider the concept of salary compression, the concept that salaries do not differ greatly between employees even if their skill levels may vary. In their analysis, Jang (2018) finds evidence that wage distribution can impact the performance of MLB teams, but that there is no such impact for KBO League teams. From this, the author argues that the difference may exist partly in the unique ownership structure of Asian sport leagues, where larger conglomerates often own professional sport franchises and considers them to be advertising for the company as a whole. As such, because teams are not as motivated to be profitable in the KBO League, it may mean that teams are not as concerned with the wages of players. Finally, in comparing teams from Korea and North America, Jang (2018) also follows the previous work of Lee and Smith (2008) who highlighted how sport fans in Korea displayed different consumption behaviors than their American counterparts. The comparison provided within this issue is thus important in that it helps to further display that it cannot be taken for granted that professional sport teams will operate in similar manners across different regions of the world.

4. Attendance Demand in Chinese Professional Baseball League

The next paper in this issue by Chang (2018) examines the demand for attendance at Chinese Professional Baseball League (CPBL) games in Taiwan. Previously, scholars have examined the performance of players in the CPBL (Jane, Kong, & Wang, 2010), as well as attendance demand in the league (Chen, Lin, & Lin, 2012). Though there are a handful of such studies, Taiwan has generally been an under studied context in Asian sports economics, especially when compared to South Korea or Japan. In the case of this specific research, Chang (2018) advances the examination of the demand for Taiwanese baseball by considering whether the existence of international baseball events, such as the Baseball World Cup, have an impact on the demand for attendance. Previously, scholars in sport history have argued that when Taiwan hosted the Baseball World Cup in 2001, there was great interest in the event as baseball is interconnected to politics in the country (Lin, Lee, & Cheng, 2010). Indeed, it is argued that the 2001 tournament not only created greater interest in the game, but also helped with short-term economic profits as well as promoting national identity within the country (Lin et al., 2010). Against this backdrop, the analysis by Chang provided in this issue uses data and applies econometric techniques to examine whether hosting or even the existence of international baseball events improves fan interest.

Using data from 1998 to 2016, Chang finds that while mega-events held abroad have a positive relationship with attendance, smaller scale (non-mega) tournaments are found to decrease the demand to attend CPBL games. Controlling for other effects, it is found that when Taiwan hosts an event there is negative attendance, but that this effect can be mitigated depending on the performance of the home team. In other words, the study finds that if Taiwan performs well in an international event it hosts, there will be an increase in CPBL attendance. However, if the team does not do well, the CPBL will experience a decline in the number of people willing to attend games.

Another important contribution from Chang’s paper, is that he also controls for the presence of a match-fixing scandal which occurred in Taiwanese baseball. There have been a number of scandals in professional sport leagues in Asia, including the black whistle scandal that forced the top-tier of Chinese professional football to re-brand, as well as match-fixing in South Korean soccer leagues and Japanese sumo. While such scandals have been more common in Asian sport leagues in recent years than in North America, researchers have not placed much attention on the potential impacts that such corruption could have on consumer interest in sport. Part of the reason for the lack of examination of these incidents is because they often are one-time occurrences that are difficult to deal with econometrically. However, as noted in the paper, there have been five such incidents in the timeframe examine by Chang (2018), and thus allows for a better examination of how match-fixing can impact sport attendance. Indeed, the results from the models provided in the study suggest that attendance does decline when the public becomes aware of match-fixing.

5. Development of Facilities in China

The final paper in this issue authored by Mason and Xue (2018), and turns focus to the development of stadiums in China from 2003 to 2013. As is noted in this study, during this time period around 1.6 million sport facilities were built in China, including over a thousand large-scale facilities. Such large scale of sport construction in China can be related to a number of factors, including the hosting of the 2008 Beijing Olympic Games, as well as the massive economic growth within the country. At the same time, this rapid construction of sport facilities in China is especially intriguing when positioned against relatively recent political and historical events within the country. As noted in the book Bamboo Goalposts that discusses the grassroots approach to the growth of soccer within China, even in the last several decades there have been policies limiting the number of people congregating together in a group. Such policies made it difficult even in the 1980’s for individuals to organize soccer leagues without special permission from the government. Against this backdrop, the large-scale and rapid development of sport facilities across the country highlights a large shift in the sport and economic policies within the country.

Notably, Mason and Xue (2018) argue that what is being observed in China is the creation of “entrepreneurial cities,” which represent a move away from the previous economic order set by the government. Rather, cities around the world have now sought to follow entrepreneurial strategies in order to try and become a competitive city in the global marketplace. This approach to the operations and governance of a city using an entrepreneurial approach includes taking actions such as marketing and the development of places and events in order to enhance economic gains. In the case of China, as noted by the authors, there is not only immense competition for international attention, but also to gain status with the central government, and in turn hopefully be provided greater amounts of financial resources. As such, the development of stadiums in China is argued to be a strategy to gain status with the central government, with cities building these facilities to compete against one another. Indeed, the numbers provided in the paper highlight that this competition is not just amongst top-tier cities in China such as Beijing and Shanghai, but even is taking place among smaller cities.

In further considering the work of Mason and Xue (2018), there are a number of contributions which should be noted from this work. From a contextual standpoint, there exists only a handful of research papers which have sought to examine the economics of Chinese professional sport, and most of these have focused on professional sport leagues (Watanabe & Soebbing, 2017). As such, this work helps to build a better understanding of the national level development of sport facilities in the country, as well as the connection to state-level policies and competition for resources within China. At the same time, though the massive construction of sport facilities could be argued to provide benefits to citizens in regards to enhanced access to sport opportunities and potential health benefits, many of these facilities are noted to have operating losses. From this, while many have long argued the importance of sport in terms of the development of society and the economy, the evidence provided in this paper certainly highlights that there is the possibility for the over-development of sport. As such, this paper provides a number of important theoretical and empirical contributions to the understanding of sport in the complex political system that exists in China.

Acknowledgements

We would like to thank the editors and editorial board for the Journal of Global Sport Management for helping put together this issue focused on sports economics and management in the Asian sports business industry. Additionally, we would like to thank those who contributed to this issue, as well as the reviewers who provided important feedback to all of the authors.

Disclosure Statement

No potential conflict of interest was reported by the authors.

Additional information

Notes on contributors

Young Hoon Lee

Young Hoon Lee (Ph.D., Michigan State University, U.S.) is a professor in the Department of Economics at Sogang University, Korea. His research fields include econometrics (panel data models and productivity analysis) and sports economics.

Nicholas Watanabe

Nicholas Watanabe (Ph.D., University of Illinois, U.S.) is an Assistant Professor of Big Data and Analytics in the Department of Sport and Entertainment Management at the University of South Carolina in the United States. His research predominantly focuses on the intersection of economics and sport, and his work has been featured in the Journal of Sport Management, International Journal of Sport Finance, and the International Journal of Sport Marketing and Sponsorship. Currently, he serves on the editorial board for: Journal of Sport Management, Journal of Issues in Intercollegiate Athletics, Sport, Business and Management: An International Journal, and Managing Sport and Leisure, and Journal of Leisure Research. In 2018, he was named a Research Fellow with the North American Society for Sport Management.