Profit maximization, win optimization and soft budget constraints in professional team sports

Since Rottenberg (1956), Neale (1964), Davenport (1969), and Sloane (1971) published their seminal papers on the peculiar economics of professional team sports, the proportion of studies conducted in this field has grown considerably. Questions of competitive balance, labor market discrimination and the economic impact of hosting a professional league team are just a few examples of research that has added new and interesting insights to the sports economic literature. One central debate, however, remains highly relevant and demands further analysis: What happens when sport meets business in a process of commercialization, which has so clearly affected several team sports over the last 40-50 years? Are clubs essentially turning into profit maximizing business entities when they attain amounts of money not previously seen? Or is the process of commercialization rather a means to an end of winning trophies and championships for the fans and the owners themselves? This chapter introduces the debate on professional clubs’ objectives, whilst applying a new theoretical perspective that gives a more detailed understanding of how the environment affects managerial decision-making than the existing literature has previously provided. By broadening the scope and considering new theoretical insights on club behavior, it enables a matrix of new club categorizations to be presented. Examples of each categorization are given in order to illustrate the scope and understanding of the perspective.

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