| Abstract: |
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. |