Institutional complexity and managerial efficiency: a theoretical model and an empirical application

This paper studies the effect of the level of a firm?s resources on managerial inefficiency. We motivate our analysis with a theoretical model which predicts that better resourced and therefore more complex institutions tend to be more likely to generate x-inefficiency. The empirical analysis estimates stochastic production frontiers for Chilean and Italian football and finds that, consistent with the theoretical predictions, team performance in the Chilean League is mainly explained by institutional factors related to the level of resources available to a club whereas team performance in the Italian League appears in addition to be related to technical decisions taken by management.