What is it about?

Yes, shared brand and geographical proximity does affect profit, but there are lots of nuances. Some firms own or align with downstream companies that produce inputs to production but that also compete directly for customers. We use the relationships between Major League Baseball teams and their Minor League affiliates to provide more details. We find that shared branding benefits the downstream firm but too much proximity harms their demand.

Featured Image

Why is it important?

To maximize supply chain efficiencies, firms often purchase or strategically align with downstream suppliers. But when suppliers also sell in B2C relationships, this can affect the performance of both firms.

Perspectives

This study examined the influence of Major League Baseball (MLB) parent club affiliations on Minor League Baseball (MiLB) demand, focusing on switching costs and geographic proximity. Analyzing AA and AAA level teams, the research found a significant negative switching cost at the AA level: AA teams experienced an 11% decrease in attendance the season after changing their MLB affiliation. This drop was detrimental and was not mitigated even by switching to an MLB partner perceived as having higher quality, status, or closer geographic proximity. For AAA teams, changing affiliation carried no switching cost. However, AAA attendance showed a positive effect from the affiliated MLB club's winning percentage and market population. The study concluded that MiLB executives, particularly at the AA level, must be acutely aware of the high cost of changing affiliations.

Dr. Joe Cobbs
Northern Kentucky University

Read the Original

This page is a summary of: Is the Grass Greener? Switching Costs and Geographic Proximity in the High Status Affiliations of Professional Baseball, Managerial and Decision Economics, June 2015, Wiley,
DOI: 10.1002/mde.2741.
You can read the full text:

Read

Contributors

The following have contributed to this page