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MDPI Books

Sports Finance

Edited by

Brian P. Soebbing

Printed Edition of the Special Issue Published in IJFS

www.mdpi.com/journal/ijfs

Special Issue Editor Brian P. Soebbing

MDPI • Basel • Beijing • Wuhan • Barcelona • Belgrade

MDPI Books

Sports Finance

Brian P. Soebbing Louisiana State University USA

Editorial Office MDPI St. Alban-Anlage 66 Basel, Switzerland

MDPI Books

Special Issue Editor

This edition is a reprint of the Special Issue published online in the open access journal International

Journal of Financial Studies (ISSN 2227-7072) from 2013–2015 (available at: http://www.mdpi.com/ journal/ijfs/special issues/sports-finance).

For citation purposes, cite each article independently as indicated on the article page online and as indicated below:

Lastname, F.M.; Lastname, F.M. Article title. Journal Name Year, Article number, page range.

First Editon 2018

ISBN 978-3-03842-871-8 (Pbk) ISBN 978-3-03842-872-5 (PDF)

Articles in this volume are Open Access and distributed under the Creative Commons Attribution

(CC BY) license, which allows users to download, copy and build upon published articles even for commercial purposes, as long as the author and publisher are properly credited, which ensures maximum dissemination and a wider impact of our publications. The book taken as a whole is c 2018 MDPI, Basel, Switzerland, distributed under the terms and conditions of the Creative Commons  license CC BY-NC-ND (http://creativecommons.org/licenses/by-nc-nd/4.0/).

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Table of Contents

About the Special Issue Editor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Pamela Wicker, Svenja Feiler and Christoph Breuer Organizational Mission and Revenue Diversification among Non-profit Sports Clubs doi: 10.3390/ijfs1040119 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Pamela Wicker and Christoph Breuer How the Economic and Financial Situation of the Community Affects Sport Clubs’ Resources: Evidence from Multi-Level Models doi: 10.3390/ijfs3010031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Kelly M. Hastings and Frank Stephenson The NBA’s Maximum Player Salary and the Distribution of Player Rents doi: 10.3390/ijfs3020075 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Ruud Koning, Victor Matheson, Anil Nathan and James Pantano The Long-Term Game: An Analysis of the Life Expectancy of National Football League Players doi: 10.3390/ijfs2010168 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Kenneth Linna, Evan Moore, Rodney Paul and Andrew Weinbach The Effects of the Clock and Kickoff Rule Changes on Actual and Market-Based Expected Scoring in NCAA Football doi: 10.3390/ijfs2020179 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Babatunde Buraimo, David Peel and Rob Simmons Systematic Positive Expected Returns in the UK Fixed Odds Betting Market: An Analysis of the Fink Tank Predictions doi: 10.3390/ijfs1040168 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Rodney J. Paul and Andrew P. Weinbach Market Efficiency and Behavioral Biases in the WNBA Betting Market doi: 10.3390/ijfs2020193 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Benjamin Waggoner, Daniel Wines, Brian P. Soebbing, Chad S. Seifried and Jean Michael Martinez “Hot Hand” in the National Basketball Association Point Spread Betting Market: A 34-Year Analysis doi: 10.3390/ijfs2040359 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

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About the Special Issue Editor

Brian P. Soebbing is an Assistant Professor in the Faculty of Kinesiology, Sport, and Recreation at the

University of Alberta, Canada. His research focuses on the strategic behavior of sport and recreation

organizations and their constituents. Prior to his current position at the University of Alberta, Dr. Soebbing was a faculty member in the School of Kinesiology at Louisiana State Univeristy and in the School of Sport, Tourism, and Hospitality Management at Temple University.

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Article

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International Journal of

Financial Studies

Organizational Mission and Revenue Diversification among Non-profit Sports Clubs Pamela Wicker *, Svenja Feiler and Christoph Breuer

Department of Sport Economics and Sport Management, German Sport University Cologne, Am Sportpark Muengersdorf 6, Cologne 50933, Germany; [email protected] (S.F.); [email protected] (C.B.) * Author to whom correspondence should be addressed; [email protected]; Tel.: +49-221-4982-6107; Fax: +49-221-4982-8144. Received: 2 October 2013; in revised form: 31 October 2013; Accepted: 4 November 2013; Published: 8 November 2013

Abstract: The beneficial effects of diversified income portfolios are well documented in previous research on non-profit organizations. This study examines how different types of organizational missions affect the level of revenue diversification of organizations in one industry, a question that was neglected in previous research. Based on contingency theory, it is assumed that different missions are associated with different funding sources. Since missions can be complementary or conflicting, specific attention needs to be paid to the combination of missions. The sport sector is chosen as an empirical setting because non-profit sports clubs can have various missions while their overall purpose is promoting sport. Panel data from a nationwide survey of non-profit sports clubs in Germany are used for the analysis. The regression results show that revenue diversification is significantly determined by organizational mission. Historically, typical mission statements like promoting elite sport, tradition, conviviality, non-sport programs, and youth sport have a positive effect on revenue diversification, while clubs with a commercial orientation and a focus on leisure and health sport have more concentrated revenues. The findings have implications for club management in the sense that some missions are associated with higher financial risk and that the combination of missions should be chosen carefully.

Keywords: revenue diversification; income portfolio; organizational mission; contingency theory; non-profit organization; sports club

1. Introduction

The concept of revenue diversification and financial portfolio theory have received increased academic attention in the non-profit sector during the last two decades with Chabotar [1], Chang and Tuckman [2], and Kingma [3] making significant contributions amongst others. The main idea of this theory is that organizations try to diversify their income portfolios to be less susceptible to financial crisis [1] and to increase their financial viability [2]. Previous research has mainly supported the beneficial effects of revenue diversification on the financial situation of non-profit organizations (e.g., [4]), although a few studies refuted those benefits [5,6]. On the positive side, organizations with diversified revenues were less financially vulnerable (e.g., [7–10]), had a lower insolvency risk [11], and less volatile revenues [12]. While the beneficial effects of diversified revenues have been well investigated, only a few studies have examined what types of organizations have more diversified revenues than others. Chang and Tuckman [2] were the first to show that the level of revenue diversification (or concentration in their study) varies depending on the activity of the organization, a finding that was further supported by Kearns [13]. In their comprehensive study, Chang and Tuckman [2] compared organizations operating in 25 different industries and found that revenue concentration was lowest for non-profits concerned Int. J. Financial Stud. 2013, 1, 119–136

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with environmental quality and for animal-related organizations, while it was highest in consumer protection and legal aid organizations. The type of activity [2] or mission [13] corresponds to the industry or the sector the organization is operating in. Thus, it is only a broad measure of activity or mission, which does not consider that organizations within one industry can have different missions while having the same overall purpose. Having this in mind, Chang and Tuckman [2] suggested that “future researchers would do well to focus on the specific activities in which non-profits engage”. The purpose of this study is to examine the relationship between different organizational missions and the level of revenue diversification of non-profit organizations within one industry. Building on the Chang and Tuckman [2] study, this study advances the following main research question: How does the organizational mission affect an organization’s level of revenue diversification? The sport industry serves as an empirical setting. Non-profit sports clubs are particularly suited to analyze this research question because they have different types of missions [14]. While every club has the overall mission of promoting sport, several sub-missions exist. One peculiarity is that those sub-missions are not only sport-related such as promoting competitive sport and/or mass sport, but also non-sport related like promoting sociability [14]. Previous research has supported the notion that sports clubs produce heterogeneous products for heterogeneous stakeholders [15–17]. For example, they do not only provide sport programs for their members, they also fulfill several social functions such as integrating youths and immigrants, and teaching youths applied democracy [18]. These functions, which contribute to public welfare and social cohesion, are appreciated by the community and by policy makers and represent one reason why sports clubs receive financial support from the government. Thus, clubs also produce other products in addition to sport programs. The variety of stakeholders may be one reason why sports organizations were found to have more diversified revenues than non-profits in other industries [2,19]. Similar to the general non-profit sector, the beneficial effects of revenue diversification have also been shown in the sport industry. For example, previous research documented that non-profit sports organizations with a diversified income portfolio are in a better financial condition [19], are less financially vulnerable [20], and have less volatile revenues [21], although not all studies could support a positive relationship [22]. However, it has not yet been examined how different types of organizational missions affect the level of revenue diversification, i.e., what types of clubs have more diversified revenues than others. To analyze this question, data from a nationwide panel survey of non-profit sports clubs in Germany are used (n = 45,074). The regression results show that the level of revenue diversification is affected by the organizational mission. The findings have implications for club management. 2. Theoretical Framework and Literature Review

Following Kearns [13], several theories can be advanced that explain an organization’s revenue composition. The theoretical streams can be assigned to four main areas including organizational behavior, political science, economics, and strategic management. They provide different perspectives on the factors associated with income portfolios of non-profits. For the present research looking at the influence of organizational mission on revenue diversification only streams from organizational behavior, political sciences, and economics are considered relevant. Strategic management theories such as resource dependence approaches look at the relationship between organizations and the external entities that support those [2] and how those relationships result in external control and power. Their focus is more on the consequences of revenue composition and not on the influencing factors; therefore, strategic management theories are neglected. This study combines the organizational behavior perspective (contingency theory) with the political science and the financial perspective (financial portfolio theory) from economics. Kearns [13] advances one theoretical approach that he calls the contingency theory of income diversification that can be assigned to the literature on organizational behavior. When looking at all the theoretical approaches, Kearns [13] notes that: “the contingency theory seems to be the most promising and intuitively appealing”. Yet, it has not been well developed in the context of revenue diversification so

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far. This is different for other organizational contexts such as organizational structure and leadership (e.g., [23,24]). The contingency theory was developed by Kearns [13] based on the findings of the Chang and Tuckman [2] study—the authors themselves have not developed such a theory in their paper. According to Kearns [13], the main idea of this theory is that an organization’s mission determines the concentration (or diversification) of its income sources, an assumption that intuitively fits with the present study. To provide some context, contingency theory is based on the seminal work of Woodward [25] who argued at the time that several contingencies such as technology and external stakeholders (e.g., government, consumers) influence organizational behavior. Generally speaking, contingency theories have the underlying assumption that there is no optimal way of managing organizations that can be applied to all organizations. In fact, the management of each organization is contingent on internal factors (e.g., organizational culture) and external factors (e.g., environment, regulations) that vary among organizations [23]. Consequently, those factors that are potentially variable are called contingency factors. In this study, the focus is on internal contingency factors relating to organizational mission. The theory supports the notion that organizations within one industry cannot be treated equally because they are likely to have different missions that are contingent on various internal and external factors. Different missions may in turn attract different funding sources thus influencing an organization’s income portfolio and its level of revenue diversification. The present study seeks to analyze the relationship between organizational mission (as one contingency factor) and revenue diversification. This study tries to enhance the understanding of contingency theory in the context of revenue diversification by applying it to the sports club context. Following more established theories from political sciences [13]—also referred to as the institutional perspective [2]—an organization is mainly concerned with its legitimacy and acceptance in the community. Legitimacy is also created by the origin of its funding sources. Thus, not only the overall amount of money available to an organization is considered important, but also where the money comes from [13]. This means that organizations pursue funding from recognized sources that increase their social acceptance. Moreover, it is likely that organizations generating funds from recognized institutions will increase their revenues from other institutions because they are considered worth of being funded. This is what has been referred to as the crowd-in effect in previous research, while the opposite effect, i.e., crowd-out effect, must also be considered [26]. Crowd-out and crowd-in effects have been examined both in general non-profit research [27,28] and in sport [29,30]. This theoretical stream has implications for portfolio management in the sense that both the origin of financial resources and the interactions among income sources have to be taken into account. This information is also critical to the present research. Given that an organization’s revenue composition is a result of the services it provides [31], organizations should carefully choose their missions (and associated services) and pay attention to the relationships between different types of missions. Organizations’ missions may have a complementary or conflicting character—content wise and consequently also financial wise. Missions can be complementary in the sense that funding institutions are likely to support both missions. In the sports club context, for example, missions relating to the promotion of competitive sport and the promotion of youth would be complementary because typically young people take part in competitive sport at the elite level. Thus, potential funding organizations would not see a discrepancy between the two missions. On the contrary, some mission statements could be regarded as conflicting. For example, the promotion of health sport and competitive sport at the same time may not be intuitively appealing to potential resource providers since both mission statements target different groups of people. While younger people are more likely to participate in competitive sport at the elite level, older people are more likely to demand health sport programs [32]. These examples show that the mix of mission statements may have an influence on the income portfolio of non-profit sports clubs.

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The idea of managing income portfolios originally stems from financial portfolio theory (e.g., [33]), which is one of the economic theories [13]. This theory has already been applied to non-profit organizations in general [3] and in sport [21]. Originally, portfolio management relates to the composition of the income portfolio in the sense of financial risk and volatility. As stated earlier in this paper, the idea is that organizations diversify their revenues in order to be more financially viable and experience lower revenue volatility. Yet, this study focuses on organizational missions and not directly on financial risk (although it will be shown later in the paper that some missions may be indirectly associated with higher financial risk than others). Therefore, this study is more concerned with different types of missions than with income sources of different risk levels. Nevertheless, attention needs to be paid to the combination of different missions since they may have financial consequences. 3. Method 3.1. Data Source

This research is based on data from the Sport Development Report, a project looking at the situation of sports clubs in Germany. Germany is home to over 91,000 sports clubs that are well spread throughout the country and that provide sporting opportunities to the German population. Out of the approximately 80 million German citizens, 27.7 million are members of sports clubs [34,35]. Within this project, sports clubs are surveyed online every two years. Thus, the project has a panel character. The first wave was conducted in 2005 with another three waves following in 2007, 2009, and 2011. The email addresses for the online survey are provided by the 16 state sports confederations before the start of each wave. From the first to the fourth wave, the number of provided email addresses has increased considerably documenting that more and more clubs are online. In 2005, 18,085 valid email addresses were provided, 37,206 in 2007, 58,069 in 2009, and 67,708 in 2011 [15,16,18,36]. The sports clubs receive an invitation email including some information about the purpose of the project, anonymity and privacy of data, and a personalized link to the online questionnaire. This means that respondents can log in and out and that several people can complete the survey, which may be useful given its length and variety of questions. The survey usually starts in fall (with the exception of the first wave where the survey started in spring). The survey period is approximately three months and one or two reminders are sent to the clubs which have not yet responded. Similar to the number of provided email addresses, the response rates have increased during the years (2005: n = 3,731; 2007: n = 13,068; 2009: n = 19,345; and 2011: n = 21,998). Each survey questionnaire consists of a standard set of questions that are similar in every wave (e.g., member statistics, sports offerings, volunteers, finances, organizational problems) and a set of questions addressing specific and current topics in sports club management (e.g., demographic change, doping, changes in the German school system, need of support). For the current study, only data from the first (2005), third (2009), and fourth wave (2011) can be used for the analysis since questions about the organizational mission of clubs were omitted in the second wave in 2007. Consequently, the final sample amounts to n = 45,074 sports clubs. Since the sub-samples of each wave are different in size and do not consist of the same clubs (although some clubs participated in more than one wave), the dataset is considered an unbalanced panel consisting of independently pooled cross sections [37]. Pooled samples drawn from the same population are considered favorable for the analysis since “we can get more precise estimators and test statistics with more power” [37]. Thus, this unbalanced panel is preferred over a normal cross-sectional dataset covering only one wave. Generally speaking, panel data are relatively rare in sports club research. To the knowledge of the authors, the data from the German Sport Development Report represent the largest panel data in quantitative sports club research. 3.2. Measures and Variables

An overview of the variables used in this study is presented in Table 1. In order to obtain revenue diversification, a concentration measure was calculated first. Revenue concentration is measured with

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an index (Herf ) similar to the Herfindahl-Hirschmann Index, a measure which has already been used in previous research [2,7,10,12]. Importantly, the index covers two aspects of revenue concentration, i.e., the number of different income sources and the extent to which revenues are distributed equally or unequally across sources [2]. The index is calculated with the following formula: (1)

where N represents the total number of income sources (25 in this study); ri the revenue generated from source i; and Rev the total revenues a club generates in one year. To put it short, Herf is obtained by adding the squared proportions of all income sources. Table 1. Overview of variables. Variable Rev div

Elite Leisure Health Cheap Quality Commercial Tradition Conviviality Non-sport Youth LN Rev/m Members Members2 Sports Sports2 Sport Year State

Description

Revenue diversification = 1 − Herf ; 0 = perfect concentration, i.e., club has only one income source; 1 = perfect diversification; Herf = sum of the squared proportions of all 25 income sources of sports clubs Organizational mission (from 1 = do not agree at all to 5 = totally agree) Our club promotes competitive sport (elite sport) Our club promotes leisure and mass sport Our club provides health sport Our club offers a cheap opportunity to play sport Our club cares about the quality of the sport programs Our club is geared towards the programs of commercial providers Our club sets value on tradition Our club sets value on companionship and conviviality Our club also provides non-sport programs Our club is engaged in the promotion of youth Total logged revenues/number of club members Total number of members in the club Members squared Number of sports provided by the club Sports squared Type of sport provided by the club (ten most frequent sports: badminton, football, track and field, shooting, swimming, dancing, tennis, table tennis, gymnastics, volleyball; 1 = yes) Year of survey (2005, 2009, or 2011; 1 = yes) Federal state (Germany has 16 states; from 1 = Bavaria to 16 = Schleswig-Holstein

Scale

Metric

Ordinal Ordinal Ordinal Ordinal Ordinal Ordinal Ordinal Ordinal Ordinal Ordinal Metric Metric Metric Metric Metric

Dummy

Dummy Dummy

In the survey, sports clubs were asked to state their revenues in the following 25 different categories: revenues from (1) membership fees; (2) admission fees; (3) donations; (4) subsidies from sport organizations; (5) subsidies from the state; (6) subsidies from the district/community; (7) subsidies from the European Union; (8) subsidies from the friends’ association; (9) subsidies from other programs (e.g., employment office); (10) fund management (e.g., interests); (11) self-operated restaurant; (12) sport events (e.g., gate revenues); (13) service fees from members (e.g., facility fees); (14) convivial gatherings (e.g., club parties and festivities); (15) sponsorship: jerseys, equipment; (16) sponsorship: boards; (17) sponsorship: broadcasting rights; (18) sponsorship: advertisements; (19) own business company; (20) course fees; (21) service fees from non-members (e.g., facility fees); (22) service fees from collaborating institutions; (23) rent/lease of own facilities; (24) credits; and (25) other (i.e., sum of all other miscellaneous revenues that could not be assigned to one of the 24 categories). All 25 income sources are used to calculate Herf. Since the index (Herf ) represents a measure for revenue concentration, the final value was subtracted from 1 to capture revenue diversification (Rev div): (2) Rev div = 1 − Herf

Organizational mission was assessed with a closed question. Respondents were asked to state the extent to which the club’s board agreed to a list of mission statements using five-point Likert scales (from 1 = do not agree at all to 5 = totally agree). As noted previously, organizational mission was assessed in wave 1, 3, and 4. Out of the list of 19 statements that were assessed in all three waves, 10 statements are selected for the current analysis. Using more items was not considered useful given the redundancy of some items (e.g., several items capture competitive sport or a commercial orientation).

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The 10 statements cover the main areas of sports clubs’ missions. Their concrete wording in the questionnaire can be seen in Table 1. The 10 mission statements under investigation can be divided into six sport-related and four non-sport statements. With regard to sport-related statements, promoting competitive sport at the elite level (Elite) is one of the core missions of sports clubs historically. Sports clubs have the monopoly for competitive sport in Germany. This means that people who want to take part in league competitions or championships at the district, state, or national level have to be a member of a sports club. Thus, promoting competitive sport is one of the clubs’ original missions. Also, clubs promote sport for the masses and ensure the provision of sport programs all over the country. Yet, leisure and mass sport programs (Leisure) have less of a competitive character. More recently, some clubs also provide health sport programs (Health) as a result of changes in individual demand. Many people are less interested in sport competitions; they want to play sport in order to become or remain fit and healthy. Thus, providing health sport programs can be considered a relatively new mission of clubs. Following Heinemann [38], providing relatively cheap programs (Cheap) compared with other providers is one of the core strengths of clubs. One of the reasons for the low membership fees lies in the fact that many clubs receive public subsidies [38]. Given the increasing number of fitness centers with some chains also offering relatively cheap prices, more and more sports clubs are faced with increasing competition from commercial sport providers. One of the strength of commercial providers is the focus on quality, both in terms of facilities and in terms of the qualification of coaches. As a result of increasing competition, some clubs have started copying the programs of commercial providers (Commercial) and pay more attention to the quality of their sport programs (Quality). Regarding non-sport missions, sports clubs are organizations with a fine tradition and thus set value on tradition (Tradition). Since many sports clubs were founded in the late 1890s or at the beginning of the 20th century, they are known for being traditional organizations. Notwithstanding tradition is not only associated with positive aspects since it may also lead to resistance to change [39]. Tradition can be fostered through non-sport programs (Non-sport) such as all sorts of social events and festivities where values and social cohesion are fostered. Social events are an integral part of many clubs, particularly of those setting value on companionship and conviviality (Conviviality). Previous research has documented the beneficial effects of social events for the functioning of sports clubs [22]. Finally, the promotion of youth (Youth) is one of the core areas of sports clubs. Historically, sports clubs are particularly concerned with getting youths off the street and provide them with a location to play sport and to learn values. Since revenue diversification is not only influenced by organizational mission, this study also controls for other potential influencing factors. Since previous research has shown that organizational size has an impact on the functioning of sports clubs (specifically on production costs and organizational problems) [40], organizational size should be controlled for in the present research. The size measures are LN Rev/m which is obtained by dividing total logged revenues by club members, Members representing the total number of club members and its squared term (Members2 ), and Sports representing the total number of different sports provided by the club and its squared term (Sports2 ). The squared terms are included to capture quadratic effects of size in terms of members and sports. These size measures have already been used in previous research on non-profit sports clubs [40]. In addition to organizational size, this study also controls for type of sport, year of the data, and state. Sports clubs in Germany provide more than 60 different sports [35]. For this research, the 10 most frequently stated sports in the survey are selected to see whether there are sports that lead to more concentrated or diversified revenues. Since approximately 40% of the sports clubs in Germany are multi-sports clubs (i.e., they provide more than one type of sport), one dummy is calculated for each sport. The types of sport variables are dummy variables, where 1 indicates that the sport is provided by the club, and 0 otherwise. Since the dataset contains observations from three waves, the year dummies control for the year of the survey. It could be that changes in the revenue composition result from

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events that happened in the year of the survey. For example, financial crisis or other external events could influence a club’s revenues. The study also controls for the state the club is located since there are differences among German states in terms of e.g., financial realities of state government, funding, and regulations that may influence a club’s revenue composition. Since this English article is based on German survey data, possible translation issues need to be considered [41]. While the questionnaire was designed by native German speakers in the German language and the survey was also conducted in the German language, the questions and resulting variables were translated into English for the purpose of this article. Thus, translation issues were not present for the design and conduction of the survey, but may be present for the writing of the article. Following Temple and Young [41], the researcher can serve as the translator or the translation can be performed by an external (professional) translator. While the term revenue diversification is a common term that has already been used in previous research [2], the translation of the organizational mission statements is more challenging because the translator needs to pay attention that the statements maintain their original meaning [42]. Therefore, the translation by the researcher was preferred in this article since the researcher is more experienced regarding the meaning of (mission) statements. The translation of the statement Our club is geared towards the programs of commercial providers was the most challenging because it could not be translated directly from the German language. The statement should express that clubs are aware of the types of programs commercial providers offer and tend to imitate or copy the programs of those providers. The challenge was to find one verb for the long explanation provided in the earlier sentence. If a word by word translation had been performed, part of the meaning would have been lost. The translation of the control variables was not considered problematic since these terms are used throughout the literature (e.g., [14,20]). 3.3. Statistical Analysis

Following Kearns [13], an organization’s income portfolio is adapted “to its changing mission and activities”. Therefore, the use of panel data seems appropriate because they capture changes in organizational missions over time. To obtain panel data, the three datasets from each wave are matched and integrated into one vertical panel dataset. Specific attention was paid to ensuring that all variables used for the analysis were assessed similarly in all waves, and are thus comparable. A similar data cleaning procedure had been undertaken in each wave to ensure the comparability of data. During this procedure, specifically the answers to any open-ended questions were checked for plausibility and content validity. Implausible values were set to missing values. Descriptive statistics are provided to give an overview of the sample structure. In a second step, regression analyses are performed to answer the main research question of this study (i.e., how does organizational mission affect an organization’s level of revenue diversification?). The regression models are of the following general form:

(3)

Altogether, two regression models are estimated. In model 2 the variables Sports and Sports2 are replaced by the type of sport variables to avoid collinearity issues. Importantly, there is no reference category for type of sport since it is not a nominal variable—the 10 dummy variables are included the analysis. When T is small relative to N (which is the case for this study where T = 3 and N = 45,074), time dummies should be included in the models [37]. Therefore, two year dummies (2009, 2011) are included; the reference category for Year is 2005. The study also controls for state influences with Bavaria being the reference category for State. There should be no collinearity problems in the models since all variance inflation factors (including those of Members2 and Sports2 ) are below the suggested threshold of 10 [43]. 7

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The two models are Ordinary Least Squares (OLS) regressions like in the Chang and Tuckman [2] study. In addition to the OLS estimator, several specifications were tried. Yet, typical panel regression models like random-effects or fixed-effects models could not be estimated because of the unbalanced nature of the panel. There are too many clubs which have only participated in one or two of the three waves. Thus, fixed-effects models cannot be estimated without losing observations. It was also not possible to use clustered standard errors to control for unobserved club heterogeneity. Regression models with robust standard errors are estimated to control for heteroskedasticity [44]. 4. Results and Discussion 4.1. Descriptive Statistics

The descriptive statistics are summarized in Table 2. They show that the average level of revenue diversification among German sports clubs is .473. This value is similar to previous research on sports clubs where revenue concentration based on the Herfindahl Index was .518 leading to a diversification value of .482 [22]. A slightly higher value of .525 was obtained in another study on sports clubs using the same measure [21]. Revenue diversification has also been examined for sports governing bodies which represent the sports organizations at the middle layers (e.g., at the community level, district level, state level, and national level) of the pyramid of the German sports system. A similar value of .46 was obtained for sports governing bodies in Germany [19]. The average revenue diversification values from this study and from previous research indicate that non-profit sports organizations in Germany have a medium level of revenue diversification. Table 2. Descriptive statistics.

Rev div Elite Leisure Health Cheap Quality Commercial Tradition Conviviality Non-sport Youth LN Rev/m Members Members2 Sports Sports2 Badminton Football (soccer) Track and field Shooting Swimming Dancing Tennis Table tennis Gymnastics Volleyball

Mean

SD

0.473 2.80 4.12 3.07 4.45 4.12 2.06 3.60 4.29 3.04 4.06 0.121 373.9 1,380,493.6 3.32 26.61 0.102 0.283 0.136 0.104 0.078 0.094 0.137 0.165 0.307 0.167

0.241 1.27 1.05 1.29 0.88 0.87 1.01 1.08 0.83 1.11 1.15 0.155 1113.9 85,754,551.0 3.95 73.27 / / / / / / / / / /

The German values are higher than the value obtained in the Chang and Tuckman [2] study for non-profits in the area of recreation, leisure, or sports in the United States. In their study, they had an average level of revenue concentration of .64 (which is equivalent to a diversification level of .36). 8

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Yet, the values are hardly comparable since there are no organizations in the United States that are equivalent to the European sport club concept. When comparing the average level of revenue diversification of sports clubs with non-profit organizations in other industries (e.g., [2,12]), it stands out that non-profits in sport tend to have more diversified revenues. One reason could be the measurement of revenues which is relatively detailed in this study using 25 different income sources. This relatively high number of income sources could ultimately lead to higher levels of diversification since Herf considers the number of income sources. Yet, this explanation is speculative since details about the number of income sources assessed in the Chang and Tuckman [2] study are not provided. Another explanation could relate to the variety of income sources of sports clubs being a result of heterogeneous stakeholders. As mentioned earlier in this article, sports clubs produce a variety of products, not only sport programs, but also non-sport programs like social events. Moreover, they produce other products such as applied democracy and integration of multiple population groups that may attract funding from different stakeholders. Following Fischer et al. [31], an organization’s revenue composition is a result of the products it provides and therefore, the variety of products may lead to a variety of income sources among sports clubs which may in turn lead to more diversified revenues. Looking at the organizational mission of sports clubs, Table 2 shows that the provision of a cheap opportunity to play sport is most important to clubs on average (M = 4.46), followed by setting value on companionship and conviviality (M = 4.29), promoting leisure and mass sport, and caring about the quality of sport programs (both M = 4.12). The mean values show that both historical and more recent missions are important which may not be compatible with each other. For example, the mission of providing high quality programs is cost-intensive and may be conflicting with providing cheap programs. At the bottom of the mission ranking are promoting competitive sport at the elite level (M = 2.80) and being geared towards the programs of commercial providers (M = 2.06; Table 2). The clubs in this sample have on average 374 members and provide 3.3 different sports. German clubs are thus larger in terms of members and sports than clubs in other countries such as the UK [45], Scotland [46], Belgium [47], and Switzerland [17]. The high standard deviation of 1113.9 indicates that German clubs are heterogeneous in size, a finding that is similar to previous research [48]. The most frequently stated sport (30.7%) is gymnastics, which includes all disciplines that are covered by the German Gymnastics Association, the national governing body for gymnastics. These are, for example, apparatus gymnastics, floor exercise, trampoline, and gym wheel. The second most frequently stated sport is football (soccer; 28.3%), followed by volleyball (16.7%), table tennis (16.5%), and tennis (13.7%; Table 2). 4.2. Regression Models

The regression models are presented in Table 3. The results in model 1 show that all organizational missions (with the exception of Cheap) have a significant influence on the dependent variable. While the variables Elite, Tradition, Conviviality, Non-sport, and Youth have a positive effect, Leisure, Health, Quality, and Commercial have a negative impact on Rev div. Thus, sports clubs pursuing those missions they historically stand for have more diversified revenues than clubs having more recent and commercial missions.

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MDPI Books

Int. J. Financial Stud. 2013, 1, 119–136

Table 3. Summary of regression models for the dependent variable Rev div (OLS). Model 1 Constant Elite Leisure Health Cheap Quality Commercial Tradition Conviviality Non-sport Youth LN Rev/m Members Members2 Sports Sports2 Badminton Football (soccer) Track and field Shooting Swimming Dancing Tennis Table tennis Gymnastics Volleyball Year Dummies (Ref: 2005) State Dummies (Ref: Bavaria) R2 F p

Coeff. 0.384 0.009 −0.014 −0.012 0.003 −0.014 −0.005 0.004 0.007 0.009 0.039 −0.330 0.000 −0.000 0.011 0.000 / / / / / / / / / /

Model 2 t 19.30 *** 4.94 *** −6.93 *** −6.56 *** 1.26 −5.03 *** −2.22* 1.98 * 2.51 * 4.66 *** 16.83 *** −10.67 *** 3.16 ** −2.48 * 6.64 *** −4.89 *** / / / / / / / / / /

Coeff. 0.384 0.011 −0.013 −0.008 0.000 −0.008 −0.007 0.001 0.004 0.009 0.036 −0.311 0.000 −0.000 / / −0.023 0.091 0.017 0.017 0.009 −0.030 −0.004 0.004 0.018 −0.036

included

included

included

included

0.205 100.753