Undergraduate Research: Are Professional Sports Teams Worth the Investment?

Young man in suit stands next to research poster.

David Noudaranouvong presents his research.

David Noudaranouvong, an honors economic major (finance minor), recently graduated cum laude from the UA. Here he shares his honors thesis work, studying the economic effect of the Oklahoma City Thunder on Oklahoma City. Noudaranouvong has already landed a job as a professional services analyst for Nielsen and will head off to work at their corporate headquarters in New York City in July. 

My research studied the economic impact of a professional sports team on a given city. I wanted to investigate just how much a professional sports team, in this case, the Oklahoma City Thunder, means to a city’s economy. This is a broad question, but focusing on the economics of the question, or the dollars and cents, provides an answer to at least one aspect of that question. The real world application of my research is apparent through its utility for any city’s chamber of commerce. If a city wants to boost their bottom line and is looking for a new source of revenue, a way to boost their economy, they could use this study when considering making a play at bringing a professional sports team to their city. My study was aimed to answer the question, “What kind of significance do sports serve?” I hypothesized that  having a professional sports franchise in a given city would generate a substantial enough boost in city revenue to warrant being considered by cities that currently don’t have a professional sports franchise and that want an enhancement in their bottom line.

Nothing went particularly wrong in my study, except that I found out that my hypothesis was incorrect!  I found that even though there was much literature in support of my thesis, there was more evidence stacked against it. My hypothesis was incorrect because I underestimated basic economic principles and ideas. The main components I underestimated included the powers of expendable income, substitutes and consumer behavior. Essentially, for any given market, it can be argued that consumers will spend their expendable income regardless of what it is on. If the NBA season is not around, then fans will find a new way to transform their earnings into something else.

I had also argued that the presence of the Thunder in Oklahoma City would prove to be a good driver of talent, wealth, and intellectual accumulation to not only the city but to the state as a whole, complementing job creation as well as boosting the region’s tourism sector and thus the overall state of the economy. I also looked at a city that was abandoned by a franchise (in this case, Seattle severing ties with the Supersonics) to see if the city took a sizeable financial, capital, and intellectual hit. There was a slight dip in Seattle’s revenue that first year, but it has since rebounded just fine. In fact, revenue levels have risen to levels higher than those when the Supersonics were in the city.  This illustrates substitution theory very well.

Having an NBA franchise is significant more on an emotional level that spills over into a financial one. How does one go about quantifying a sports team’s grip on a city, a grip that encompasses one area’s excitement, enthusiasm, and fanaticism? The mere presence of, or lack of, an NBA franchise does not mean that a city’s financial health will be better or worse; it just means that city’s taxpayers and tourists will have a more recognizable outlet for their expendable income.  This study’s original hypothesis may be incorrect, but has led to another question begging to be asked:  What is the significance of a professional sports franchise to a city? Essentially, the impact I was after (dollars and cents) was minimal – if microeconomics had a micro level that is where the economic effect would be; there is not a significant enough change to declare a professional sports team has a large effect on a city’s economy. However, the social effect (what types of people are moving to the area, pride in the area, etc.) may very well be large and needed to be taken into account.  This is a loaded question, one that will require much more research and analysis. Perhaps this is a question to be asked another day.

This research topic taught me the importance of the material that I had been learning about in the classroom. Economics was coming to life for me, as supply and demand became more evident, as consumer behavior became more clear, and as substitutes and expendable income were illustrated. Doing this research has certainly increased my understanding of economics. Meanwhile, I learned about my resilience and perseverance in the process. There were many times that I felt discouraged by the types of information I was discovering throughout the course of my research.  I found that my hypothesis was incorrect, but kept going. I found a way to turn the negative (an incorrect hypothesis) into a positive (explaining what I learned and discovering why my hypothesis was wrong).

My faculty mentor, Dr. Robert Stapp, helped me immensely through his advice and personal testimony. In addition to recommending articles to read and suggesting where to find more literature that related to my research, Dr. Stapp was able to provide first-hand knowledge of the Oklahoma City area. He is conveniently from the Oklahoma City area, and was around before the NBA’s Thunder came into town. He was able to share with me what the area was like beforehand, and how the area transformed with the team within city limits. Now, whether these changes could all be attributed to the Oklahoma City Thunder was for me to find out.

Other faculty members certainly extended helping hands to help me with my thesis. Ms. Susan Bristow helped immensely by serving as my second reader – her review provided incredible insight into making my thesis stronger. Another faculty member who helped me out was Mrs. Jennifer Kish-Gephart.  She helped me by providing letters of recommendation and other material towards my application for the grant.  I appreciate these professors’ assistance, and certainly wouldn’t have reached the conclusion of this large project without them.

The work that I have put into school has culminated in a degree and essentially the stamp of approval from the University of Arkansas. I graduated cum laude along with a few other awards to my name. My continued heavy involvement in extracurricular activities in addition to my pursuit of academic excellence in my classes and work experience gained at my job have helped me reach my ultimate goal, the reason I  came to college in the first place. I have successfully secured a full-time job after graduation! In July, I will be starting as a professional services analyst for Nielsen in the greater New York area.  The excitement and anticipation I feel for this next chapter in my life are beyond words. I am eager to take a bite out of the Big Apple and make my mark in the workforce, while starting off what I hope to be a long and successful career with a bang.

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