Organizing mega-sporting events and its influence on inward FDI

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Organizing mega-sporting

events and its influence on

inward FDI

Author: Romano Bersma, 6179274 Date of submission: 29-01-2016

Qualification: MSc. In Business Administration-International Management Track Institution: University of Amsterdam (UvA)

Supervisor: Erik Dirksen

Statement of originality

This document is written by Romano Bersma who declares to take full

responsibility for the contents of this document.

I declare that the text and the work presented in this document is

original and that no sources other than those mentioned in the text and

its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the

supervision of completion of the work, not for the contents.

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Abstract

In this paper the link between hosting a major-sporting event and foreign direct investment (FDI) is discussed. Using investment data from UNCTAD a GEE-approach has been used, and the results show that there might be a link between hosting a sporting event and the level of inward FDI. The mega-sporting events taken into account are the FIFA World Championships, the UEFA European Championships, the summer Olympics, and the winter Olympics. In order to gain more insight onto the differences between these events hypotheses were tested. The results show that there seems to be a higher number of inward FDI when hosting the FIFA World Championships than hosting the UEFA European Championships. The hosting of the summer Olympics or the winter Olympics seem to have the same influence on inward FDI. Finally the hosting of a football event seems to have more influence on inward FDI than the hosting of an Olympic event.

Keywords: FDI, mega-sporting events.

1 Introduction

Only a few months ago the Dutch Olympic committee (NOC) decided to give the right to organize the European Games back to the European Olympic committee. According to the NOC there are too much uncertainties, and most importantly there is little consensus about who will be responsible for potential financial losses. Although the origin of the European Games is quite new (the first European Games were held in the early summer of 2015 in Azerbaijan) the decision of the NOC is not in line with the current trend regarding the willingness from cities to host a mega-sporting event. According to Baade & Matheson (2004) countries compete with each other to earn the right to organize a

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sporting event in order to profit from a so-called economic windfall. Positive economic effects from organizing a mega-sporting event are for example: a significantly larger pool of tourists visiting the city or region where such an event is held, and an increase in (temporary) jobs. However, economic disadvantages may occur as well for instance due to the costs of improving the infrastructure, and the building of new stadiums. The aforementioned competition between cities or regions for the right to host a mega-sporting event may be linked to the concept of competition. According to Dunn and McGuirk (1999) place-competition is a place-competition between cities or regions on the level of the best place to invest. Cities or regions try to attract foreign direct investment (FDI) through place-marketing which logically means that these cities or regions attempt to make their ‘place’ most attractive. To put it differently these localities attempt to make the investment environment of a city or region more attractive. The investment environment consists of physical, institutional, and symbolic conditions. An example of making the symbolic condition of a city or region more attractive may be by hosting a mega-sporting event. Whether there is an actual relationship between hosting a mega-sporting event and more FDI is unknown. An attempt will be made within this paper to answer the question if there is a link between hosting a mega-sporting event and FDI. So the research question is:

What is the influence of hosting a major-sporting event on the level of inward FDI in the host country?

Answering this question may be academically relevant, because most attention within the scientific literature regarding mega-sporting events is directed to the question if it is justifiable to use public money to host a mega-sporting event. The results of this study may be used by proponents of hosting mega-sporting

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events with the argument that these events may induce more FDI. Opponents may use the results of this study as well in case the results of this study will show that the hosting of mega-sporting events will not lead to more FDI. This statement also aids in explaining why this study may be of practical relevance. The results of this study may be used by politicians or other parties who wish to strengthen their arguments both for parties that are in favor as well as for parties that are against hosting a mega-sporting event by the city or region they are related to. In addition to the potential relevance for parties strengthening their arguments in favor or against mega-sporting events this paper may contribute to the intertwined relationship of MNEs and FDI. According to Blonigen (2004) one of the main questions within the academic field of FDI research remains why firms would choose to service a foreign market using direct investments. This paper might show that mega-sporting events could be a driver for firms to invest abroad. Data will be obtained through sources from the United Nations, and more specifically from their statistics website where one may download statistics data regarding FDI flows. Important to note that in this paper only gross FDI data will be used (inward FDI data), because in order to find an answer to the research question and in order to test the proposed hypotheses net FDI data is not relevant. The mega-sporting events taken into account within this paper will be the summer and winter Olympics, the FIFA World Championships, and the UEFA European Championships held between 1993 and 2010. Because the mega-sporting events just mentioned are not equal in size, and not equal in exposure different outcomes may be expected for these events individually. Therefore hypotheses will be tested which try to shed some light onto the differences between these events, this will be made more clear in the research method section. The structure of the paper will now be enlightened. In

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the following chapter of this paper a literature overview will be given on the topic of FDI and mega-sporting events. Then the research method will be explained, and the hypotheses will be presented. After that the results will be given, and the findings of the statistical analysis will be discussed. Then the conclusion and limitations of this study will be presented. Finally suggestions for further research will be given.

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2 Theory

Within this chapter relevant theories will be discussed on the topic of FDI and mega-sporting events. At first theory regarding FDI and MNEs will be discussed and why firms would engage in FDI. Then theory regarding mega-sporting events will be discussed, and which events will be used within this paper.

2.1 Foreign Direct Investment

One of the first scholars to mention Foreign Direct Investment (FDI) was Stephen Hymer. One of his main contributions to the academic field of International Business theory is the distinction between portfolio investment and FDI. The main difference between these two investments is that portfolio investments are investments made in other countries which are merely financial i.e. may be conducted in order to gain from different interest rates between different countries. FDI on the other hand also gives some control over the business activities where such a firm invested in (Hymer, 1960). These direct investments where a firm gains some control over overseas business activities are mainly done by multinational enterprises (MNEs). Since the data that will be used within this paper is derived from the statistics database from the UN it may be useful to discuss the definition for FDI from that source as well. The definition for FDI described in the World Investment Report (WIR), published by the UN on a yearly basis, is as follows: FDI is an investment which involves a long-term relationship and a lasting interest and control over a business entity in a foreign economy done by a business enterprise which resides in a different economy than the host economy (UN, 2015). One may note that this definition just as the definition given by Hymer implies that the investor gains a certain degree of control over the foreign business activities. When the term FDI is mentioned in

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this paper the definition given by the UN will be used, because the data used within this paper comes from that source as well.

2.2 FDI and the multinational enterprise

The strong relation between MNEs and FDI may be best described by the statistic that the largest 500 MNEs are responsible for over 90% of the world´s FDI (Rugman, 2000). Foreign direct investment and MNEs are thus concepts often mentioned in the same context. This context will now be explained more thoroughly. A good example of a definition used by scholars for the MNE is: an MNE is a firm which uses FDI to possess assets abroad. Such a direct investment can be done through buying a business unit or a company in the host country or by expanding operations to another country (Goldar & Ishigami, 1999). The amount of ownership and control over the MNE’s foreign subsidiary could be a distinguishable aspect between different forms of FDI. MNEs can choose for a joint venture which means that the MNE does not have full ownership over the entire foreign subsidiary and partly shares ownership with another firm. Another option is the wholly owned subsidiary; in this case the MNE owns and controls the whole foreign subsidiary (Pan & TSe, 2000). The level of ownership and control may relate to different types of foreign based MNE activity. One may distinguish between four different types of foreign based MNE activity:

1. Foreign activity designed to satisfy foreign markets, also known as market

seeking;

2. Foreign activity which aims to gain access to (unique) natural resources, also known as resource seeking;

3. Foreign activity designed to create more efficiency, also known as

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4. Foreign activity designed to protect the ownership advantages of the investing firm or to reduce the ownership advantages of its competitors, also known as strategic asset seeking FDI (Dunning, 2000).

Of course doing business abroad will also induce some disadvantages to the investing firm. Such disadvantages have been identified by scholars as liabilities of foreignness (LOF). An example of a liability of foreignness may be higher costs for the investing firm due to spatial distance or higher costs for the investing firm due to unfamiliarity with the host country (Sethi & Judge, 2009).

2.3 Drivers for Foreign Direct Investment

In the following chapter international business theory will be presented regarding the motivations for firms to engage in FDI. The theories mentioned in this chapter are: the OLI paradigm, the Uppsala internationalization process, and transaction-cost theory.

The eclectic or OLI paradigm

Among scholars the eclectic paradigm has been a dominant framework which aids in understanding why MNEs engage in FDI. The eclectic paradigm claims that the interaction of three interdependent variables is the reason why MNEs engage in (more) FDI. These three interdependent variables are Ownership, Location, and Internalization theory which together combined form the OLI paradigm. Ownership advantages refer to the exploitation of the firm’s own competitive advantage(s) and to try to exploit these advantages abroad by engaging in FDI. Location advantages refer to competitive advantages derived from access to unique raw materials, (ICT-) infrastructure, low wages or special taxes. Using the firm’s organizational specific advantages in combination with the locational advantages will trigger firms to engage in FDI. Internalization

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advantages refer to advantages derived from producing by the firm itself instead of through licensing or through a joint venture. Potential benefits of internalization may be a reduction in external uncertainties, less market failure, and a decrease in transaction costs (Dunning, 2000).

Uppsala internationalization process

The Uppsala internationalization model depicts the internationalization of a firm as a gradual process. A firm will most likely not engage in FDI in a country which is completely unknown or will not commit a lot of resources to a certain country without internationalization knowledge. The model thus claims that firms without much internationalization knowledge will most likely invest in countries which are culturally and geographically close, and when more internationalization knowledge has been gained more distant countries may be considered for FDI, because of the gained internationalization knowledge. Also the form of commitment may gradually change over time due to increased knowledge about the market. For instance a firm at first might engage in exporting when knowledge of the foreign market is low, and when market knowledge increases the firm may commit more resources and engage in more FDI, for example through establishing subsidiaries (Johanson & Vahlne, 1977).

CAGE distance framework

The CAGE framework deals with the motivations for firms to engage in FDI regarding location. Why do certain firms invest for example in China whereas other firms invest in Brazil?

The CAGE framework is a tool for firms for doing international business, and understanding what differences may be encountered when doing business

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abroad. One should note that the framework is industry specific, so the differences may weigh heavier across industries. The CAGE distance framework consists of four main differences:

1. Cultural differences: these differences stem from the interaction between people. For example different languages, different religions, and different ethnicities;

2. Administrative differences: laws, policies, and institutions may lead to administrative distance;

3. Geographical distance: of course physical distance, but also difference in time zones and different climates;

4. Economic distance: firms from rich countries are more eager to invest in other rich countries (Ghemawat, 2007).

2.4 The importance of FDI

We know have gained some insight into why firms are willing to invest overseas, and what drives firms to invest abroad. In retro perspective there is a need to investigate why countries, regions or cities would want overseas firms to invest in their localities. In this chapter it will be made clear what the importance of FDI for the host country is in regard of economic growth.

FDI and economic growth

One of the most important drivers for countries, regions, and cities to attract FDI is the impact FDI could have on economic growth. FDI has a positive influence on economic growth through the transfer of technology. Economic growth may thus be realized through adopting new technologies introduced by the investing MNE (Borensztein et al., 1998). Bloström et al. (1998) acknowledges this point of view and adds to the equation that the most important reason for countries to

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attract FDI is to gain knowledge about management and marketing skills. The acquiring of new skills is also commonly known as knowledge spillovers. Another reason for economic growth through FDI is the result of increased competition in the host country. MNEs that gain entry to the host market might compete in that market which triggers local firms to make better use of their resources in order to be competitive, and doing so may lead to (more) economic growth.

2.5 Mega-sporting events

In this chapter it will be explained what mega sporting events are, and which mega-sporting events will be used within this paper.

The mega in mega-sporting events

Mega-sporting events are, simply put, mega because they have an international allure and are of international significance. However, scholars have difficulties in defining what makes an event a mega event. One might look at viewership numbers, but those numbers are often unreliable, and may even be manipulated. According to Müller (2015) mega-sporting events have a few characteristics in common. They have a lot of viewers, high organizational costs, have a big impact on the infrastructure, and they attract a large number of visitors. A distinction is made between major-, mega-, and giga-events. When events score high on all four characteristics just mentioned they are giga, when they score high on three of the characteristics they are mega, and when they score medium high on all four characteristics they are major events. Within the academic field of mega-sporting events this is an interesting viewpoint, because most scholars and other parties use only one characteristic to define what a mega-sporting event is. This distinction is important, because looking at only one characteristic gives a one-sided view. The multidimensional view as just described delivers more reliable

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results regarding the definition of mega-sporting events. Among the giga- and mega-sporting events are the Summer Olympics, the Winter Olympics, the FIFA World Cup and the UEFA European Championships1_.

2.6 Mega-sporting events and its potential influence on economic

activity

Mega-sporting events will have significant consequences for the nation, regions or cities where such an event is being held. Another feature of mega-sporting events is the extensive coverage of the event in the media. The growth of the mega-sporting events and the willingness to host or participate in mega-sporting events is for a large part due to the media. The emergence of new technologies for mass communication has led to an enormous growth of the potential audience. Consequently the amount of money paid for the media rights for these events have risen as well. Another important reason for the growth of interest in mega-sporting events is the valuable promotional opportunity for nations, regions or cities. Because of the growing popularity of mega-sporting events cities are bidding for the right to host these mega events and by hosting these events they try to make their cities more attractive for numerous sorts of economic activity (Horne, 2006). According to Sola (1998) mega events could have an impact on tourist volumes, visitor volumes, increased positive image, and increased attractiveness through improved infrastructure. One may state that one of the main motives for cities to host a mega-sporting event is the contribution to economic development. Dunn and McGuirk (1999) elaborate on this statement by saying that cities are competitively bidding for the right to host

1 _{These are the four events, as mentioned previously, that will be used to answer the}

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a mega-sporting event in order to attract international investment. They state that nations, regions and cities compete with each other in a place-competition. Place-competition originates from the globalization of the world, and because of the globalization of the economy. As discussed earlier the emergence of the MNE has been explained; MNEs are looking for places to invest internationally and this has resulted in the emergence of place-competition. Place-competition means that nations, regions, and cities compete with each other on the level of offering the best place for foreign investors to invest. The best investment environment is what the competing parties in a place-competition are striving for. The investment environment features several conditions which may overlap with the aforementioned CAGE-distances. The investment environment comprises of:

 Physical conditions: for example infrastructure, and telecommunications networks;

 Institutional conditions: investment incentives, and regulations;

 Symbolic conditions: the image and aesthetics of the place of investment. Place-competition goes hand in hand with place-marketing, where nations, regions, and cities try to promote their locality as the best place to invest. The bidding for the right to host a mega-sporting event may be seen as a form of place-marketing and eventually hosting a mega-sporting event may result in the opportunity to attract a more favorable investment environment during and after the mega-sporting event.

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3. Research question and hypotheses

As discussed in the theoretical section there are numerous reasons for MNEs to invest abroad. According to place-competition and place-marketing theory a reason for MNEs to invest in country x instead of country y is due to the image of the place of investment. A way to improve such an image may be through the hosting of a mega-sporting event. The hosting of a mega-sporting event should then lead to an increase in FDI in the nation, region or city. Therefore the research question is as follows:

What is the influence of hosting a major-sporting event on the level of inward FDI in the host country?

As explained before the research question will be answered using investment data form UNCTAD. Answering this question may be academically relevant, because there is not much written about the link between hosting a mega-sporting event and FDI. Answering the research question may also be of practical relevance due to the fact that parties involved in hosting a mega-sporting event might make use of the results of this study in strengthening their viewpoints regarding mega-sporting events. Due to the fact that the mega-sporting events used in this paper are not completely equal it may relevant to look at the differences between these mega-sporting events, and their influences on the level of inward FDI. Therefore using the four characteristics for mega-sporting events as described by Müller (2015) will be used to form hypotheses. The FIFA World Championships is regarded as a bigger mega-sporting event than the UEFA European Championships in number of viewers, costs, and visitor attractiveness. The influence on the infrastructure will probably not differ a lot. Combining these factors leads to the formation of the following hypothesis:

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Hypothesis 1: Hosting the FIFA World Championships will lead to more FDI in the

host country than hosting the UEFA European Championships.

According to the multidimensional view of Müller (2015) the latest summer Olympic games in London can be characterized as a giga-sporting event, and the latest winter Olympic games as a mega-sporting event. The number of viewers is probably lower for the winter Olympics due to the fact that the winter Olympics consists of fewer sports to compete in. Additionally winter sports are most of the time not popular in countries which are not familiar with cold conditions. The Jamaican bobsleigh team was for instance an unique experience in the history of the winter Olympics. Probably the winter Olympics will have less exposure than the summer Olympics. Therefore it is expected that hosting the summer Olympics will lead to higher levels of inward FDI than hosting the winter Olympics:

Hypothesis 2: Hosting the summer Olympics will lead to more FDI in the host

country than hosting the winter Olympics.

The football events combined score higher on the characteristics list than the Olympic events combined. This could be due to the fact that football is one of the biggest sports in the world, and due to the fact that football is a sport which is associated with a lot of viewers. Therefore one might expect that a football event leads to more inward FDI than an Olympic event:

Hypothesis 3: Hosting a football event will lead to more FDI in the host country

than hosting an Olympic event.

In the next chapter the research method will be explained, and the data will be presented.

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3.1 Research Method and results

Data is derived from the statistics website for the United Nations Conference on Trade and Development (UNCTAD). On this website one may find various statistics concerning international trade and development, and these statistics are open for everyone who wants to use them. Therefore one may easily replicate this research by using the same data used within this thesis. The data used within this research are inward FDI numbers between the period of 1992 and 2013. The countries taken into account are the countries which organized a mega-sporting event within the just mentioned timeframe. In the appendix one may find a list of the countries which are taken into account, and a list of the mega-sporting events held during that time period.

The FDI data derived from the UNCTAD website has been put into Excel to be able to make calculations more easily. In order to be able to compare different (world) economies with each other there will have to be made corrections to the data derived from the UNCTAD website. The most obvious reason for doing this is due to differences between countries regarding inward FDI numbers as a consequence of (economical) differences between countries. One way to correct the FDI data is to divide the FDI numbers by GDP2_{. These correctional}

calculations have been made in Excel, and then have been copied into SPSS. These numbers (FDI divided by GDP) represent the dependent variable within this research. The independent variables used within this research are the year of the mega-sporting event, and the country where the mega-sporting event has been held. In addition to these dependent and independent variables a dummy

2

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variable has been created in order to make sure in SPSS when the mega-sporting event has been held in a certain country in a certain year. For example in the year 2000 the UEFA European Championships were held in the Netherlands (and Belgium) thus in SPSS the year 2000 will receive the number one and the other years concerning the Netherlands will receive a zero. As one may have deduced by now this research comprises of longitudinal data or to put it differently there are several measures of FDI (twenty-two to be exactly) for each country individually. According to Ballinger (2004) one may use the generalized estimating equation (GEE) method in order to deal with longitudinal data in SPSS. Ballinger explains that the GEE method is more commonly used in medical science, but there are also situations applicable for organizational researchers to use the GEE method. The GEE method will be used within this research in order to answer the main question: What is the influence of hosting a

major-sporting event on the level of inward FDI in the host country?

Table one shows that there was no missing data or corrupt data and that n=418.

Case Processing Summary

N Percent

Included 418 100,0%

Excluded 0 0,0%

Total 418 100,0%

Table 1

Table two shows that there is reason to assume that there is an effect between organizing a mega-sporting event and the level of inward FDI in the country where such an event is being held. The table shows a significance level of 0,000 which is lower than the p=0.05-95% confidence interval. Therefore one might assume that organizing a mega-sporting event such as the FIFA World

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Championships, the UEFA European Championships, the summer Olympics, and/or the winter Olympics might result in more inward FDI in the host country.

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Parameter Estimates

Parameter B Std. Error 95% Wald Confidence Interval Hypothesis Test

Lower Upper Wald Chi-Square df Sig.

(Intercept) ,297 ,0544 ,191 ,404 29,826 1 ,000

(Scale) ,092

Dependent Variable: FDIDIVGDP Table 2

As explained earlier, and as depicted by table 2 there seems to be an effect between organizing a mega-sporting event and the level of inward FDI. To test if there is a difference between the FIFA World Championships and the UEFA European Championships the FDI numbers used in the GEE calculations are used. A distinguishing dataset has been created where the FDI numbers are used of the year of the hosting of a certain mega-sporting event plus three years before the mega-sporting event, and three years after the mega-sporting event. These FDI numbers will be corrected again for economic disparities by dividing the FDI numbers by the GDP numbers of a certain country. Reason for including more years into this dataset is because there might be already an effect in the years before and after the mega-sporting event.

A two-sample t-test is used to test hypothesis one and the results are shown in table 3. Levene’s test for equality of variances shows that we have to look at the lower end of the table (p=0,000<0,005) so we assume that that there are no equal variances. We then look at the significance level of the lower part of table three to determine whether our assumption

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is significant. Because the significance level is lower than our chosen confidence-interval (p=0,000<0,005) we know that there is reason to assume that the variances are not equal between our chosen groups. We thus conclude that there is reason to believe that there is a difference between hosting the FIFA World Cup and the UEFA European Championships.

Independent Samples Test

Levene's Test for Equality of Variances

t-test for Equality of Means

F Sig. t df Sig.

(2-tailed)

Mean Difference

Std. Error Difference 95% Confidence Interval of the Difference

Lower Upper FDIDIVGDP Equal variances assumed 17,425 ,000 -5,879 85 ,000 -,27018437 99456 ,0459573674105 -,3615599386801 -,1788088212111 Equal variances not assumed -6,686 76,882 ,000 -,27018437 99456 ,0404094754127 -,3506518908725 -,1897168690187 Table 3

As shown in table 4 Levene’s test for Equality of Variances shows that we have to look at the first row of the table (p=0,545>0,005). We thus assume that the variances are equal. The significance-level is higher than the 5%-confidence interval (p=0,14>0,05) so we may say assume that there are no significant differences between hosting the summer

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Olympics and the winter Olympics when looking at the level of inward FDI. We therefore have reason to believe that there is no difference between hosting the summer or winter Olympics in regard of the level of inward FDI.

Levene's Test for Equality of

Variances

F Sig. t df Sig.

(2-tailed)

Mean Difference Std. Error

Difference

95% Confidence Interval of the Difference Lower Upper FDIDIVGDP Equal variances assumed ,370 ,545 2,531 61 ,014 ,0976526812357 ,0385800061479 ,0205071910331 ,1747981714383 Equal variances not assumed 2,566 60,310 ,013 ,0976526812357 ,0380630157876 ,0215233564872 ,1737820059842 Table 4

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Looking at table five one may see that we have to look at the first row of the table (p=0,014>0,05). We assume that the variances between hosting a football event and hosting an Olympic event are equal. Because the significance level found in table five is lower than the 5%-confidence interval we may assume that there is a difference between variances between hosting a football event and hosting an Olympic event. We thus conclude that there seems evidence to assume that hosting a football event leads to more inward FDI than hosting an Olympic event.

Levene's Test for Equality of

Variances

F Sig. t df Sig.

(2-tailed)

Mean Difference Std. Error

Difference

95% Confidence Interval of the Difference Lower Upper FDIDIVGDP Equal variances assumed 6,139 ,014 6,187 148 ,000 ,2200891502534 ,0355730701002 ,1497924062615 ,2903858942453 Equal variances not assumed 6,619 146,015 ,000 ,2200891502534 ,0332508513104 ,1543740304800 ,2858042700268 Table 5

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4. Discussion

Looking at the statistical findings depicted in chapter three one might assume that there is an effect between organizing a mega-sporting event and the level of inward FDI in the host country. This collaborates with the findings in the theoretical section on the topic of hosting a mega-sporting event and attracting economic activity. The findings presented in this study may contribute to the statement that hosting a mega-sporting event may result in more economic activity such as increased inward FDI levels in the host country. This statement however will at the same time raise a lot of questions. One may not simply conclude that hosting a mega-sporting event automatically will generate positive inflows of money. The fact that hosting a mega-sporting event might lead to higher levels of FDI does not automatically imply that hosting a mega-sporting event will generate revenue. It may still be the case that hosting a mega-sporting event will cost more money than it generates, despite higher levels of inward FDI. There is so to say no direct link between higher levels of FDI and revenue generated through hosting a mega-sporting event. Therefore the practical relevance of the outcomes of this study as mentioned in the introduction may be helpful for politicians, and other parties involved in hosting a mega-sporting event, but will not be regarded as a groundbreaking result for these parties. One might say that the decision made by the NOC to not organize the European games in 2016 might be justifiable, because of the uncertainty regarding the financial outcomes. This also implies the need for more research on this topic. For the NOC it would be practically relevant to know more about the financial effect(s) the increase in FDI could have on the (national) economy in order to make the right decision to host a mega-sporting event or not hosting a mega-sporting event. It might be the case that although inward FDI levels are

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higher there still will be a loss of (public) money. Academic researchers may elaborate on this study by looking at the lagged (financial) effects of hosting a mega-sporting event. In this study there is the sole focus on the effect between hosting a mega-sporting event and the level of FDI in the year a mega-sporting event is being held. It may be the case that inward FDI levels will increase in the years before the mega-sporting event, and a lagged effect on inward FDI levels as well. For instance the hosts of the FIFA World Championships 2018 and 2022 were made publically known in the year 2010 so there is a certain probability that firms may engage in FDI in the years before the event takes place. When we look at the link between the OLI-paradigm, and mega-sporting events one may say that the location aspect of the OLI-paradigm could be linked to mega-sporting events. Firms engage in FDI due to locational advantages such as improved infrastructure. It is not uncommon that the hosting of a mega-sporting event will lead to more investments in infrastructure. Firms are then more likely to invest in such countries especially when these countries have a lot of CAGE-differences between the investing firm and the host of the mega-sporting event. One may state that hosting a mega-sporting could act as a bridge between culturally and geographically distant countries. This statement aids in the findings of this study that there seems to be a link between hosting a mega-sporting event and the level of inward FDI. According to the Uppsala internationalization process firms are more likely to invest in countries which are geographically and culturally close, and then gradually invest in more distant countries due to the ‘learning’ process of investing. This theory alongside with the theory of place marketing where a desirable investment climate is created may also loosen the gap between firms and countries which have high CAGE-distances. Hosting a mega-sporting event may result in bringing a certain region

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or city to the attention of a firm, and trigger this firm to invest in that region or city.

5. Conclusion

The right to host a mega-sporting event is a right which cities are intensively competing and bidding for. Recently it became public that certain countries were so eager to host a mega-sporting event that they tried to bribe sports officials in order to gain the right to host a mega-sporting event. The parties involved in these bidding wars seem to have either a great heart for sports or they think they will bring in the goose that laid golden eggs when such a bidding war has won. The link between hosting a mega-sporting event and economic benefits is still unclear. This paper has showed that there is reason to assume that mega-sporting events might lead to higher levels of inward FDI, but that does not mean that it will be beneficial to host a mega-sporting event. There is no one-on-one relation between hosting a mega-sporting event and economic advantages. Looking at the differences between mega-sporting events one may be note that there seems to be a bigger impact on inward FDI when hosting a football event, and in particular the FIFA World Championships. Hosting the summer Olympics will probably have a positive impact on inward FDI levels as well, but are associated with larger domestic investments.

6. Limitations and recommendations for future

research

The results found in this study might be of practical relevance as mentioned previously, but are not so robust that they will convince parties such as the NOC that hosting a mega-sporting will not cost a lot of public money. Therefore future research is needed in order to try to answer this question more precisely. Of course incentives to host a mega-sporting event do not only consist if financial

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incentives, but they are still most convincing when one deals with public money. Another point of view future researchers could dive into is the difference between hosting a mega-sporting event in developing countries in comparison with those held in developed countries. One might assume that due to CAGE distances there could be significantly different levels of inward FDI in either one of these countries.

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Appendix 1

List of countries used within research (on alphabetic order)

Australia Austria Belgium Canada China France Germany Greece Italy Japan Korea, Republic of Netherlands Poland Portugal South Africa Switzerland Ukraine United Kingdom United States

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Appendix 2

List of mega-sporting events used within this paper

1994 FIFA World Championships USA

1996 UEFA European Championships England

1996 summer Olympics USA, Atlanta

1998 FIFA World Championships France

1998 winter Olympics Japan, Nagano

2000 UEFA European Championships Belgium & the Netherlands

2000 summer Olympics Australia, Sydney

2002 FIFA World Championships Japan & the Republic of South-Korea

2002 winter Olympics USA, Salt Lake City

2004 UEFA European Championships Portugal

2004 summer Olympics Greece, Athens

2006 FIFA World Championships Germany

2006 winter Olympics Italy, Turin

2008 UEFA European Championships Austria & Switzerland

2008 summer Olympics China, Beijing

2010 FIFA World Championships South-Africa

2010 winter Olympics Canada, Vancouver

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Organizing mega-sporting events and its influence on inward FDI