CAPITAL INVESTMENT AND MANAGERIAL EFFICIENCY A SIMPLE MODEL FOR SPORT CLUBS

This paper analyzes the relation between resource inputs and managerial effort in sport teams (or, more generally, in firms). The discussion is motivated by a theoretical model that suggests that clubs use managerial effort as a substitute of capital resources in the production process. In this framework, different levels of effort are always optimal decisions given its relative cost. Thus, the relatively higher effort exerted by small (compared to big) sport team is not a consequence of hidden information or incentive problems in the organization but it is a optimal decision of small team/firm to offset capital market restrictions. Managers in big firms, on the other hand, are not obliged to offer their maximum personal effort given that it can be more easily substituted by capital resources in the production process.