1. Introduction
The question of how and under what circumstance organizational performance can be boosted is classic, yet, important to the wide range of research agendas in business and management research [
1,
2,
3]. From a sports organizational perspective, scholars and practitioners have continuously devoted great attention to this issue and strived to find various determinants that have positive impact on the performance of sports organization [
1,
4,
5,
6,
7,
8]. Some researchers attempt to identify the relationship between team members, suggesting that stability and longevity of team relationships [
6], team cohesion [
8], and tactic knowledge developed by shared team experience [
1] are beneficial to sports performance.
Particularly, there is a different stream of research on this agenda, which focuses on the influence of a corporate system, in specific, corporate governance on the performance of professional sports teams [
9,
10,
11]. Mainly based on the Western context, these studies shed light on the role of advanced governance factors in maximizing team efficiency. Their findings support that strategic capacity of board [
9], board composition, induction and training of directors, information disclosure [
11], audit committee, risk management, and financial planning [
10] positively affect the club performance.
Although previous studies have examined the effectiveness of diversified ownership in a team, our understanding on the relationship between them and team performance remains limited, particularly in the context of Asian countries. In these countries, where professional sports are predominantly controlled by the large industrial corporations, such as business groups (e.g., chaebols), rather than by wealthy individuals or the general public as in Western countries [
12,
13,
14], the game results of a sports team may be contingent not only on the team-level capacities, such as players, coaching staff, and fan royalty, but also on the firm-level resource endowment and the active resource sharing mechanism in its parent company.
In this study, we particularly focused on the role of the chaebol as a crucial resource provider for the affiliated professional sports teams [
15,
16,
17]. Business groups are not limited in Korea but exist extensively, particularly in the emerging economies [
15,
18]. Khanna and Rivkin [
19] explain that business groups play significantly important roles in the countries and regions, such as Latin America (grupos), Japan (keiretsu), Korea (chaebols), and India (business houses). These groups are generally run and owned by the particular families and function actively and widely in the country [
19,
20]. Chaebols substantially contribute to the wealth of Korean economy, with approximately 40 percent of the total output in Korea coming from the top 30 chaebols [
15]. Notably, most of the business groups, including Korean chaebols, are in form of highly diversified organizational structure that facilitates the internalization of strategic resources and the resource sharing among the member organizations [
15,
21]. This peculiar internal mechanism offers the useful framework that allows us to explore its role in developing team performance, specifically in winning titles in professional sports competitions. Given the great influence of corporate ownership on professional sports leagues in Asia, examining the link between this type of corporate ownership and sports performance has the utmost importance.
Another important, yet difficult to neglect, issue is how financial crisis affects the performance of business group affiliated team. The Asian financial crisis that swept Korea in 1997 caused drastic socioeconomic changes, such as the restructuring of chaebols [
22]. Joh [
23] explains that poor corporate governance structure managed by Chaebols was one of the main reasons for the outbreak of the 1997 financial crisis in Korea. Finally, there was a series of bankruptcies and drastic reconstructing of business groups during the event [
22,
24]. Concurrently, their sports clubs were also affected by the significant level of restructuring, or even sold out to other firms [
25]. Consequently, it is logical to draw that the game performance of the chaebol-affiliated clubs would be affected by the negative macro event. While the extant research generally tends to concentrate on the team-level financial distress and its relevant factors (i.e., player salary, weak governance) [
26,
27], the effect of financial crises has significantly downplayed the factor of athletic achievements in management arena.
To fill in these research gaps, using the hand-collected data of the game results from 1983 to 2013, the current study examines the impact of ownership by industrial corporations on the team performance. Specifically, using the case of Korean business group called as chaebol, we investigate (1) whether chaebol-affiliated teams achieve athletic outcomes that are superior to those owned by non-chaebols (i.e., non-affiliated firms, citizen) in the national championship leagues of four professional sports: baseball, football, basketball, and volleyball or not. We take a step further and investigate (2) whether or not the Asian financial crises affect the business group-affiliated sports organizations.
Extending from the prior studies on team performance, our study makes several contributions. First, this study contributes to the strand of literature on the corporate governance by improving our understanding of business groups as a critical determinant of team performance in professional sports. Although studies have examined the effectiveness of business groups on the financial performance of the group-affiliated firms [
18,
28,
29], few research works have directly attempted to investigate their association with the team performance from the sports organizational perspective.
Consequently, few empirical findings have been found studying this relationship, despite of the sports teams affiliated with these firms pursuing heterogeneous organizational objectives [
16,
17], having low levels of organizational independency [
13,
16], and being of the predominant form of ownership, particularly in East Asian economies [
12]. Addressing this research void, findings from this research will offer fresh insights into how special features of business groups, such as diversification, affect the play of the teams on the field, a factor that has largely been neglected in the sports management literature.
Second, our level of analysis of the sponsorship from chaebols examines whether the performance of sports team in the game is in line with the previous business groups and chaebols studies or not by adopting the transaction cost approach and the resource-based view (RBV) as the theoretical lenses to capture the insights. A plurality of studies regarding business groups and chaebols have been conducted to examine the impact of their internalized resources and sharing among member organizations on firm performance [
15,
18,
23]. Currently, it is difficult to directly examine the internal transactions and resources of the chaebol-affiliated team with the team performance since Korean clubs do not provide the annual reports in public. However, we can utilize the academic contributions from the numerous previous studies in business groups, and it is notable that the extant theory has not leaped far from the past notion that the talented players should be beneficial to the team performance [
30,
31] or that the manager capacity helps significantly in terms of enhancing the game results [
5,
6]. If the corporate ownership of sports team is crucial as a resource provider in the professional sports [
32,
33], different dimensions on the research approach should be applied in order to understand how the firm-level resources play in sport organizations, particularly in the context of business group. Exploring this relationship would help advancing the academic knowledge that has been heavily biased toward the relationship between the team-specific resources and team performance link, shedding new light on the effectiveness of firm-specific resources in sports teams.
Third, our research adds to the sparse literature on the effects of financial crisis in the wider economy on professional sports teams. Most prior theorizing and studies on the financial instability of sports teams have focused on the previous cases that make teams fall into insolvency [
26,
27], thus overlooking the impact of the economic slowdown on professional sports leagues. This issue is particularly important in the context of the corporate ownership in East Asia, given the strong financial link between parent companies and their affiliated sports teams [
13]. Thus, by examining the 1997 Asian financial crisis that led many chaebols into bankruptcy, our study offers new insights to the influence of serious economic recessions on the game performance of the chaebol-affiliated sports clubs in Korea.
4. Results
Table 1 demonstrates the descriptive statistics of variables and the correlation matrix. The highest value of the variance inflation factors is 4.97, thus, it is less than five. We conclude that multicollinearity is not a serious problem in this model.
Table 2 represents the results of league winners and league finalists in the sample. We have set two main hypotheses. For Hypothesis 1a (panel A), which posits chaebol teams are more likely to be the league winners than non-chaebol teams, the significance level in the GEE estimation is at 1 percent (
p < 0.01), supporting Hypothesis 1a. In the same vein, Hypothesis 1b (panel B) predicts that chaebol teams are more likely to be the league finalists than non-chaebol teams. The result of Hypothesis 1b also shows statistically positive significance with a 1 percent significance level (
p < 0.01). To summarize, the results of the analysis show that chaebol teams attain higher game performance than non-chaebol teams, as we expected.
To examine Hypotheses 2a and 2b, we additionally divide the whole sample period of this research from 1983 to 2013 into three 10-year periods: 1983–1993, 1994–2003, and 2004–2013. The Asian financial crisis happened in 1997–1998. Thus, approximately three years before and after the event, the 1994–2003 period reflects our Hypotheses 2a and 2b.
Table 3 indicates the results of analysis from the years from 1983 to 1993. It is seen that the GEE estimation is positively associated in two dependable variables. League winners (panel C) are statistically significant. League finalists (panel D) are also statistically supported at 5 percent significance level (
p < 0.05). The results show that professional teams under chaebol ownership have strong tendency to achieve a higher performance than the teams under non-chaebol ownership during the period from 1983 to 1993. However, the test results for the sample period from 1994 to 2003 exhibit dramatically different trends of the chaebol ownership on game performance to those examined in previous hypotheses.
Table 4 demonstrates that the period between 1994 and 2003, that includes the onset and the effective period of the 1997 Asian financial crisis demonstrates that league winner (panel E) and finalists (panel F) are statistically insignificant. Therefore, the positive effect of chaebol ownership on the team performance is not observed, as shown in panel E and F. The results portray that there was no chaebol effect on Korean professional team sports during the fatal period of the Korean economy crisis.
The relationship between chaebols and their affiliated professional sports teams is distinctively altered once again for the measure of data from 2004 to 2013, demonstrating statistically positive impact of chaebols, as shown in
Table 5 (panel G, H). Therefore, hypotheses 2a and 2b are statistically supported. Our results highlight that the chaebol effect has not only consistently existed in the Korean professional sports market, but also significantly influenced the level of athletic achievement in sports organizations during the third decade.
To obtain the statistical inference, we provide the cross-equality test of coefficients between two sample periods: first decade and third decade. The null hypothesis of interest is given by
where
j denotes the type of performance (WINNER, FINALISTS), and
first and
third indicates the first decade and the third decade samples, respectively.
Table 6 shows that two chaebols coefficients estimated on two different samples are not statistically different since all
p-values are greater than 0.05. Therefore, in the context of Korea, the chaebol effect on the affiliated professional sports teams has been consistently shown in the first (1983–1993) and third decades (2004–2013). The chaebol effect was not seen during the second decade (1993–2003), wherein the Asian financial crisis took place.
5. Discussion and Conclusions
5.1. Discussion
Despite the large volume of studies on the relationship between a business group and its affiliated companies, the issue of whether and how business groups affect organizational performance in its affiliated sports teams has been a neglected area of research in extant literature. In order to explore this ignored, yet important, topic, (1) our study examined how chaebols are associated with the sporting performance of their professional sports teams. (2) We also tested for the effects of chaebol ownership on the organizational performance in professional sports during the Asian financial crisis. Using the panel data that measures game results of the national championship leagues from 1983 to 2013, our research empirically confirms that chaebol-affiliated professional teams significantly outperformed non-chaebol teams at sports competitions for most of our sample periods.
However, the positive relationship between chaebols and athletic success on the playing fields was an exception in the results for the period from 1993 to 2003 that includes the 1997 Asian financial crisis that struck the Korean economy. During this devastating time of economic recession, the professional sports teams affiliated with chaebols failed to be ranked above the finalists in the national championship leagues, showing no statistically significant association with winning a game. This finding indicates that economic recession and the resulting financial distress in the owner corporations significantly affect the game performance of sports teams in Korea. The economic aggravation that Korea suffered in the late 1990s caused the drastic business retrenchment of chaebols [
22,
23,
24]. Most chaebol-affiliated professional sports teams were seriously impacted by the vulnerable economic situation of the owner firms; thus, they were given significantly reduced funding from the group or were, at worst, even disbanded.
Our results strongly suggest that the chaebol ownership plays the important determinant of team performance in Korean professional sports. Through providing their natural benefits of diversified resources and active resource sharing [
15,
45], chaebols are able to help the affiliated sports teams acquire critical knowledge, capacity, and resources more affluently and efficiently than non-chaebols with no or lower level of diversification and internalization of resources. Consequently, these salient assets derived from the group-level resources may allow the sports teams to boost up their athletic success more than non-chaebol teams. Our findings also imply that professional sports franchises controlled by the business groups are more likely to achieve superior game outcomes than those owned by the non-business groups in other countries with institutional context that is similar to that in Korea.
Our paper makes a number of contributions to the field of corporate governance. The findings derived from our research improve our understanding of an important, yet underdeveloped type of sports ownership, namely the business group, in determining organizational performance in professional sports teams. More specifically, our research sheds new light on chaebols as the professional sports team owner and elucidates how this type of ownership (such as internalizing and transferring vital resources within the firm) impacts the athletic success of their affiliated sports organizations.
Furthermore, our research contributes to better understanding of the effects of economic recessions and downturns on sports. This aspect is particularly important in the institutional context where sports teams are principally controlled by chaebols, as is the situation in Korea. By investigating how financial crisis is serially correlated with chaebol affiliated sports teams, this paper not only enriches previous studies that have mainly concentrated on the previous cases of team-level financial crisis but also those that have largely overlooked the consequences of the financial crisis in the wider economy.
Lastly, our study adds to the literature on the sports ownership that has largely focused on the cases of Western countries by suggesting the effectiveness of corporate ownership in professional sports in East Asian countries where professional sports teams are characterized by significantly low levels of self-reliance and marketing/promotion identity.
This research also provides some implications for practitioners and scholars. Our findings offer empirical evidence that chaebol teams outperform non-chaebol teams in sports competitions. Therefore, non-chaebol team managers should recognize that chaebol ownership positively affects the performance of affiliated team and should, thus, strive to develop their own competitive capabilities in order to respond to the benefits derived from the chaebol ownership. It also confirms the significant association between business groups and performance of sports teams in the context of Korea. Thus, the results may offer an important implication for scholars and sports managers in other countries where sports ownership by business groups is prevalent.
Our research has some limitations. Our paper does not consider team-wide management style and decision-making processes, which may affect team performance itself, as well as the ways in which they deal with the risks and obstacles associated with team performance. We examine chaebol status itself without utilizing intra-group resources sharing, internal business transactions, and VRIN (value, rare, inimitability, and non-substitutability) characteristics related variables due to the limitation of obtaining their annual reports. Therefore, researchers may try to examine variables specific to the chaebol teams in the future research using various methods, such as survey, in order to find the impact of chaebol clubs on team performance.
In this study, chaebols are regarded as one type of business groups. Even if business groups are prevalent in numerous emerging countries [
15], their specific characteristics may vary from country to country [
64,
65]. In this respect, our results may be limited to Korea. In order to generalize these findings, further studies considering the samples of other countries using the comparative method are necessary.
Despite the prevalence of business groups running many sport organizations, the relationship between group-affiliated teams and their performance is significantly ignored in the literature, particularly those based on the quantitative analysis. Thus, in future study, scholars need to pay more attention to business groups as the critical determinant of performance of the sports teams and carry out more empirical studies in order to find their various effects on sports organizations.
5.2. Conclusions
Using the panel data with extensive information of four major Korea professional sports, we offer empirical results on the effectiveness of chaebols regarding their game performance of the affiliated sports team. Drawing on the transaction cost approach and the RBV, we specifically compared the game performance between chaebol-affiliated teams and non-chaebol teams. Our empirical findings confirm that professional sports teams under the chaebol ownership have enjoyed the positive effects of owners on playing successfully, as they are more likely being league winner and finalists than those owned by non-chaebol owners. We also verify that the positive effect of chaebols continues during the two sub-sample periods (1983–1993 and 2003–2013). However, the positive relationship is not in line with the test results for the other sub-sample period between 1993 and 2003, which includes the 1997 Asian financial crisis.