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Better quality in the beautiful game

Better quality in the beautiful game

Globalization and Goals: Does Soccer Show the Way? by Branko Milanovic, Carnegie Endowment for World Peace

With the World Cup kicking off next week, the time is right for a look at some academic studies of football. Milanovic’s paper shows how globalization has immensely benefited soccer, not only for clubs but also for national sides.

Football is easily the most globalized sport, especially after the removal of all limits on foreign players playing in European club football. With the total commercialization of club football, as Milanovic puts it, “the introduction of labour mobility under the conditions of uneven concentration of financial power of the clubs will have increased concentration of club quality."

In short, inequalities between clubs will become greater with the richest of them being able to buy the best players. Further, when the best players play together and are coached by the best coaches, their skill levels improve, thus leading not only to a higher quality of the game, but also to even wider inequalities between the first- and second-division clubs.

The author looks, for example, at the Italian Serie A. He points out that “Italy is interesting not only because its championship is probably the toughest in the world, but also because it is economically divided between the rich North and the poorer South".

As the game has got more commercialized, the richer North should have increased its hold on the game. That is precisely what has happened, as Milanovic says: “The average number of Southern clubs used to be vary between three and four (out of 16-18 clubs in the Serie A) during the entire period from 1960s to the 1990s. Now, for the first time since World War II, in 2002 and 2003, there are no Southern teams at call in Serie A."

The author points out that a related benefit has been that the game has provided supporter bases for clubs far away from their traditional home base. Thus, Manchester United has a very strong following in Asia and more recently in North America, and English Premier league games are routinely watched all over Asia.

At the same time, football also has national teams, where foreign players cannot play. Federation Internationale de Football Association (Fifa) rules severely limit the use of money and do not allow labour mobility, that is, players are not allowed to change national teams. These national teams are able to benefit from the enhanced skills of their players who have gone abroad to play in the European clubs.

The net result: “After a period of strong dominance of the traditionally best soccer nations (Brazil, Germany, Argentina and Italy) in the 1970s and 1980s, the situation changed in the 1980s. In the four latest World Cups, there were always at least two newcomers among the top eight national teams." In short, the inequality between national teams has reduced. Globalization of football, therefore, has not only benefited the quality of the game but made the competition among nations keener.

The Benefits of Financial Markets: A Case Study of European Football Clubs, by Dirk G. Baur and Connor McKeating, Dublin City University Business School

Surely, if commercialization has helped football so much, initial public offers (IPOs) of football clubs should benefit the game even more? The researchers analyse the performance of European football clubs on the field after they have gone in for IPOs.

The authors find that, “The results show that football clubs do generally not benefit from a stock market listing. An IPO (listing) only has a positive impact for the success in the home league for football clubs playing in smaller leagues or lower-division football clubs that belong to large leagues. The effect is reversed for the success in the international competition (the UEFA Cup or the UEFA Champions League). Here, only clubs playing in the top division slightly benefit from a stock market listing. However, the effect is statistically insignificant."

What’s worse, the stock price of a football clubs reflects its latest performance on the field, so a listing doesn’t even help investors financially.

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