Do Mega Sport Events create international economic activity in the host country? : a quantitative study focuses on the effect of Mega Sport Events on the international economic impact of the host country with a comparat

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Do Mega Sport Events create international

economic activity in the host country?

A quantitative study focuses on the effect of Mega Sport Events on the international economic impact of the host country with a comparative approach.

Master Thesis

MSc. Business Administration – International Management

1st supervisor: E. Dirksen MSc

2nd supervisor: dr. M.K. Westermann-Behaylo

Student: Thom van Mechelen

Student ID: 6040918

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Statement of originality

This document is written by student Thom van Mechelen who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are 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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predicted if a country is hosting a Mega Sport Event (MSE). This study investigated the Summer Olympics and the FIFA World Cup over the past 20 years. The main question to answer is if the level of international economic activity will increase for the host country of an MSE. The results reveal that the overall foreign direct investment (FDI) inflows of all rubric MSEs will increase for the host country after the MSE took place. However, results are different depending on what kind of country is hosting the MSE. The level of FDI inflows will increase for developed countries but will decrease for emerging markets, for instance South Africa. The overall level of economic growth of all rubric host countries will decrease if a country is hosting an MSE. This result is the same for developed and emerging markets. Finally the overall level of international trade (import and export) of all rubric MSEs will increase for the host country after the MSE took place. But also for this result there is a difference between host countries. The level of international trade will increase for developed countries and will decrease for emerging markets, for instance China. On the basis of the results of this study, it can be concluded that the overall level of international economic activity will increase if a country is hosting an MSE.

Keywords: Mega Sport Event, Summer Olympics, FIFA World Cup, international

economic activity, foreign direct investment, economic growth, international trade, import, export, developed countries and emerging markets

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1. Introduction

There is no doubt that an event like the FIFA World Cup in Brazil captures huge attention and with it, generates massive amount of passion. During an event like this many stakeholders are involved, all with their own interest. In Brazil there were people who

supported or were opposed the FIFA World Cup last year. People demonstrated because they could not understand why the government of Brazil put so much money in this Football tournament. They wanted that the money went to education, human health care and better working conditions. On the other hand this World Cup can be an economic opportunity for Brazil. In a nutshell, Brazil is trying to extricate itself from a four-year-long equilibrium of low economic growth, high inflation, high and internationally uncompetitive unit labor costs, and an overvalued currency (Goldman Sachs, 2014). So the World Cup and the upcoming Olympic in Rio de Janeiro can help Brazil to attract foreign direct investments (FDI) from Multinational Enterprises (MNE) and international trade from all around the world.

The focus of this study is to explain the effect of an event like the FIFA World Cup or the Summer Olympics on the international economy activity of the host country. According to Brune and Garrett (2005) international economic activity consists of three aspects: FDI inflow/outflow, economic growth (GDP growth), and international trade (import and export). So is GDP of the host country rising? Are the FDI inflows of the host country rising? How about the import and export of the host country? All these questions will be answered in this quantitative study. Unfortunately the World Cup in Brazil could not be included in this study because there isn’t data available yet. This study focuses on the Mega Sport Events (MSE) over the past 20 years. An MSE is a very large or great sport event. For example, the World Cup in South Africa in 2010 and the Summer Olympics in Beijing in 2008. There are more kinds of MSEs but this study focuses on the Summer Olympics and the FIFA World Cup, because these are the biggest international sports events. Also the study investigates if there is

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a moderating effect. For instance, is the effect stronger if the host country is an emerging economy? This leads to the following research question:

What is the effect of a Mega Sport Event like the FIFA World Cup or the Summer Olympics on the international economic activity of the host country?

Sub-questions:

• What is the effect of a Mega Sport Event on the foreign direct investment inflow of

the host country?

• What is the effect of a Mega Sport Event on the economic growth of the host country? • What is the effect of a Mega Sport Event on the international trade (import and export)

of the host country?

• Are these effects different between emerging and developed countries?

Over the past years studies have investigated the effect of an MSE (Baade,

1994;Kasimati, 2003;Rose & Spiegel, 2011;Jakobsen et al.,2012). Baade (1994) tested if an MSE stimulates the economic growth of the host country. The results showed that there were no stimulations in economic growth for the host country. Kasimati (2003) made a short overview of some MSEs, like the Summer Olympics and the FIFA World Cup. The results of Rose and Spiegel (2011) showed that an MSE stimulates the international trade of the host country. And according to Jakobsen et al. (2012) the effect of an MSE is positive for FDI inflows of the host country. In contrast with these studies, this study has a comparative approach. This study focuses not only on one event but on several. This way it can come up with a comparative analysis. Also this study includes a moderating effect and so fills the gap in the consisting research.

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The contribution of this study is to get a better understanding of the effect of an MSE on the international economic activity of the host country and specific in a comparative approach. In this way the study can analyze if there is a moderating effect. Also for society, for example Brazilian society, it is important to get a better understanding if a Mega Sport Event is good for the country. Especially with the Summer Olympics in Rio de Janeiro coming up.

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2. Literature Review

2.1 Mega Sport Events

The term Mega Sport Event (MSE) is already discussed in the introduction but what is an MSE? According to a dictionary an MSE is a large or great sporting event. Horne and Manzenreiter (2006) considered two standards are attendance at the event and television viewership of the event. The two standards have multiple dimensions: number of attendees and viewers, the share of attendees and viewers who come from outside the host city/country and at last the number of TV transmission hours or a combination of transmission duration and spectatorship. Table 1 displays a short overview of MSEs defined by Maennig and Zimbalist (2012)

MSEs and normal sport events are not the same and they differ in multiple aspects. First, MSEs are different from normal sport events from an economic point of view. For instance, the size of the budget, differentiated into organizing budget and non-organizing budgets (infrastructure, national security and operations) (Maennig & Zimbalist, 2012). Second, there is also a macroeconomic impact such as employment, income, and tax revenues on a national, regional or urban level. Third, the biggest contrast between MSEs and normal sport events is the income from outside the host city/country. Indeed, international

significance might be regarded as one of the most important criteria to differentiate between MSEs and normal sport events (Roche, 2000). Finally MSEs are different from normal sport events because their character as short-term events with long-term consequences for the cities/countries that host them (Richie, 2000).

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10 Table 1

Overview of MSEs

Sport Event Country

Olympics Summer Olympics Varies

Olympics Winter Olympics Varies

Football FIFA World Cup Varies

Football UEFA European Cup Varies

Football UEFA Champions League Final Varies

Baseball MLB World Series United States of America

American Football NFL Super Bowl United States of America

Maennig and Zimbalist (2012)

2.2 Short overview of Mega Sport Events

There is no doubt that an event like the FIFA World Cup in Brazil or the Summer Olympics captures huge attention and with it, generates massive amount of passion.

The next paragraph represents a short review of the consisting literature of some Mega Sport Events (MSE). First, the 1984 Olympics of Los Angeles was analyzed by Economic Research Associates (1984). This study used an output model based on a standard input-out model used in the US for local impact analysis, RIMS II. The study concludes the

economic impact of the Olympics on California was $2.3 billion, and provided 73,375 jobs. Second, the economic impact of the 1988 Seoul Olympics was $1.6 billion, with an increase in employment of 336,000 jobs (Kim et al., 1989). Third, Brunet (1995) analyzed the

economic impact of the 1992 Barcelona Olympics. This study concludes the economic impact was $0.03 billion, with 296,640 new jobs in Spain. Fourth, the economic impact of the 1996 Atlanta Olympics was $5.1 billion and generated an additional 77,026 jobs (Humphreys and Plummer, 1995). This study used the input-output RIMS II, an updated version of the same model used by Economic Research Associates (1984) for the Los Angeles Olympics. Fifth,

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three studies have examined the economic impact of the 2000 Sydney Olympics of 2002. All of these studies were before the actual Olympics of Sydney. The main goal of these studies was to predict the costs and benefits for Australia. The economic impact of the Olympics on Australia was estimated to be $5.1 billion (KPMG, 1993), $4.5 billion (Andersen, 1996) and $4.5 billion (NSW Treasury, 1996) with an employment gain in Australia of 156,198 jobs (KPMG, 1993), 90,000 jobs (Andersen, 1996) and 98,700 jobs (NSW Treasury, 1996). Sixth, Balfousia-Savva et al. (2001) and Papanikos (1999) have examined the economic impact of the 2004 Athens Olympics. The economic impact of the Olympics was $10.2 billion

(Balfousia-Savva et al., 2001) and $15.9 billion (Papanikos, 1999). Last, Irons (2000)

examined the effects of the country hosting the Olympics by comparing GDP growth rates for Olympics host from 1952-2000. This study concludes that in the four years leading up to the Olympics growth rates are higher than average by as much as 1.5%. In the eight years after hosting the Olympics growth rates are on average below their long-term mean. Irons (1998) also examined the impact of the FIFA World Cup on growth rates. The finding are that average GDP growth rates for World Cup hosts between 1954 and 1990 were 1% higher in the two years following the World Cup compared to in the two years prior to the event. In both cases, the comparison of average growth rates is only suggestive and contains no statistical tests of validity.

2.3 Foreign Direct Investment

Controlling and managing value-added activities in other countries is known as

foreign direct investment (FDI). An equity stake of 10% or more in a foreign-based enterprise defines FDI by the United Nations. FDI can be divided in two ways: FDI inflows, which refers to FDI moving into a country in a year, and FDI outflow, which means FDI moving out of a country a year (Peng, 2012). Countries do benefit from FDI inflows for several reasons:

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FDI can provide in employment, capital inflow and technology spillovers for domestic

companies (Aitken & Harrison, 1999). So governments often promote FDI inflow. Companies do also benefit from FDI inflow. It requires a significant equity ownership position. The benefits of direct ownership lie in the combination of equity ownership and management control rights (Peng, 2012).

Dunning (1998) explains four motives for FDI: market seeking (horizontal exploitation, efficiency seeking (vertical integration), natural resource seeking (vertical integration) and strategic asset seeking. Market seeking is mainly seeking for regional markets, skilled professional labor, presence/competitiveness of related firms, quality

domestic infrastructure and institutional competence. Efficiency seeking is more emphasis on skilled labor, competitive related firms, infrastructure and institutions, being close to users. Increased role for governments: upgrade factor endowments, remove impediments,

availability of advanced factor endowment clusters and specialized factor inputs,

opportunities for innovation in a competitive environment. Natural resource seeking is mainly seeking for local opportunities for upgrading the quality of resources and their processing and transportation, availability of local partners for knowledge and or capital intensive resource exploitation. Strategic asset seeking is more emphasis and need to link across countries (expand firm specific advantages (FSA) across borders), price and availability of ‘synergistic’ assets of to foreign firms, opportunities for exchange of localized tacit knowledge, ideas for learning. Access to different cultures, institutions and systems; access to different consumer demands and preferences.

There is also a risky side in FDI. When firms conduct FDI they take part in

institutional processes in both home- and host countries (Rosenzweig & Sing, 1991;Xu & Shenkar, 2002). Providing a stable environment for FDI governments play an important role. Stable political and economic environment, the rule of law and infrastructure are important

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conditions for FDI. Multinational Enterprises (MNE) take all these factors in consideration when conducting FDI. For developing countries it is hard to catch up with the developed countries.

2.4 FDI impact of Mega Sport Events

When firms conduct FDI, it is important to have in mind that the very nature of MSEs is temporary. This particularly applies to one-off events that cannot be expected to come back to the host region within any reasonable time horizon (Jacobsen et al., 2012). The role of an MSE is to create activity for some time and, temporarily to attract people and create

awareness, before the whole thing shuts down and the economic activity and awareness will be directed towards the next event that will be hosted somewhere else (Spilling, 1998). It is very important for the host country to what degree an MSE can stimulate economic activity beyond the time horizon of the event. In principle, an MSE may serve as a catalyst for effects such as (Ritchie & Aitken, 1984;Ritchie & Yangzhou, 1987;Getz, 1991;Spilling,

1994;Spillng, 1998):

• Improving material infrastructure like roads, railways and telecommunication. • Providing significant sports and culture facilities that can create opportunities to

organize new events after the MSE.

• Developing a ‘soft infrastructure’ for hosting events, all kinds of competencies for

marketing and organizing events. The infrastructure may partly materialize in the form of new service firms.

• Creating awareness of the region/nation as an attractive host of sport and cultural

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• Create a more entrepreneurial climate and thereby stimulate the development of

consisting firms and the starting up of new firms.

• Creating awareness of the region as a dynamic area, and attracting people and

companies to settle in the area.

Hosting an MSE does not only come with positive externalities but also negative externalities occur such as increased environmental problems, terrorism and temporary or permanent displacement of villagers (Whitson & Horne, 2006). The factors above indicate probable positive effect in the form of dynamic long-term development. Long-term effect can also occur prior to the event. The preparation process usually takes several years and involves investment in sport facilities as well as the upgrading of local infrastructure (Solberg and Preuss, 2007). For example, hosts of the Olympic Games are elected seven years prior to the Games. And even before that, the cities are likely to spend resources in order to become candidate. China spent about $40 billion to prepare for and to host the 2008 Olympics (Maening, et al., 2012)

Infrastructure can be distinguished among primary, secondary and tertiary

infrastructure for cities hosting the Olympics (Solberg & Preuss, 2007). Table 2 provides an overview of the structure required to host sport events of a large size, like the Olympics or FIFA World Cup. Primary structure is built for the purpose of hosting the event. Secondary structure contains building the village for the athletes and media, training facilities and parklands. At last tertiary structure, this covers all other elements like traffic and tourism.

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15 Table 2

Structure demands of sporting events on cities/countries hosting an MSE

Jakobsen et al.(2012)

Illustrative is the 2012 Summer Olympics in London. A large number of multinational companies (MNEs) like Skanska and Telefónica have secured substantial public procurement contracts (Chartered Institute of Purchasing & Supply, 2011). Large MNEs can often draw on a pool of intangible and tangible resources, including technology, managerial skills and organizational skills (Jakobsen et al., 2012). Often those resources and skills are out of reach of domestic businesses and the marginal cost of usage for the MNE is negligible. This may particularly apply to smaller countries, or countries in the developing world (Dunning, 1981). So many hosts of MSEs expect FDI inflows to rise as a result of the event (Bitzenis et al., 2009).

Primary structure

Sport and leisure 1. Stadium

2. Indoor arena 3. Special facilities

Secondary structure

Housing and recreation 1. Athletic village & media village

2. Media and press village 3. Training facilities 4. Parklands

Tertiary structure

Work and traffic 1. Traffic: airport, mass transportation, roads 2. Tourism: hotels, attractions

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Multiple cases showed that foreign-based MNEs are involved with hosting an MSE. Theory and evidence lead to the conjecture that MSEs might be associated with an increase in FDI inflows to the host countries (Jakobsen et al., 2012). The most expected effects will be prior the event, for example building the stadiums. However, these effects can also generate spinoff effects after the MSE took place. MNEs can have positive experiences and showed the MNEs new opportunities, this may tempt the MNEs to invest even further. Or MNEs liked the conditions of the host countries or others are more concerned with the demand side (Jakobsen et al,. 2012). For example the foreign-owned auto plants in South Africa. An MSE can make the host city or country a more attractive place in which to locate business, as happened to the 1992 Olympics host Barcelona (Brunet, 2002).

The consisting literature on FDI informs about the motives of MNEs. The determinants of FDI indicate that economic growth matters greatly to MNEs (Jensen, 2003;Flores & Aguilera, 2007; Büthe & Milner, 2008). Also proven destinations of FDI are likely to be coveted even further by FDI, possibly due to agglomeration effects (Barry et al., 2003;Campos & Kinoshita, 2003;Jakobsen, 2006;Bobonis & Shatz, 2007;Halvorsen, 2012). This means the concentration of MNEs will rise in the area, agglomeration, where the MSE took place. In other words the level of FDI inflows will increase in this area. Finally MNEs value highly countries with a flawless level of infrastructure development (Dunning, 1988). Those three aspects of FDI form a major part of reasoning for why it makes sense to bid for MSEs (Jakobsen et al., 2012). The conceptual model (figure 1) of this study, chapter 3, displays the relation between hosting an MSE and FDI inflows. This study expects FDI inflows will increase if a country is hosting an MSE and this led to the following hypotheses:

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H1b: Hosting the Summer Olympics will lead to a higher level of FDI inflows for the host country.

H1c: Hosting the FIFA World Cup will lead to a higher level of FDI inflows for the host country.

2.5 Economic impact of Mega Sport Events

The second aspect of Brune and Garrett’s (2005) definition of international economic activity is economic size/growth (GDP change). This aspect will be discussed in this section of the literature review. Independent studies of the economic impact of MSEs detect no statistically positive relation between MSEs and economic development (Baim,

1992;Rosentraub, 1994;Baade, 1996;Noll & Zimbalist, 1997;Waldon, 1997;Coates & Humphreys, 1999;Coates & Humphreys, 2003). In the next paragraph a short overview of studies that tested the economic impact of MSEs is given.

First, cross section studies, for example, Baade (1994) found no significant difference in personal income growth. This study was conducted from 1958 until 1987 in 36 different host cities/countries. Second the time series studies of Baade and Sanderson (1997) found no evidence for economic growth in 10 cities that acquired new sport teams between 1958 and 1993 after controlling for other economic trends affecting each area.

Concluding from the literature on this topic, there is a lot of skepticism if MSE stimulates economic growth of the host city/country. Claims that MSEs provide a substantial boost to the economy of the host city, region and country have been strongly criticized by some scholars (Baade et al., 2003). The conceptual model of this study displays the relation between hosting an MSE and economic growth. The theory led to the following hypothesis:

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H2: Hosting an MSE will not lead to a higher level of economic growth for the host

country.

2.6 International trade impact of Mega Sport Events

The integration of international trade; FDI and international financials has three

interdependent trends that drive globalization: technological innovation, growing international economic activity, and liberalization of foreign economic policy (Garrett, 2000). Brune and Garrett (2005) showed how to measure international economic activity:

- Economic size/growth (GDP change) - International capital flows (FDI flows) - International trade (import and export)

The first two are already discussed in the sections above. International trade (import and export) will be discussed in this section. Do MSEs stimulate the international trade of the host country or do they not is the big question in this section.

First there will be given some examples of MSE involved with trade organizations. In 2001, China was awarded the right to host the 2008 Summer Olympics. In the same year, China successfully concluded negotiations with the World Trade Organization (WTO), formalizing its commitment to trade liberalization (Rose & Spiegel, 2011). Spain joined in 1986 the European Economic Community (EEC), the same year Barcelona was awarded to host the 1992 Summer Olympics. At last Mexico joined the General Agreement on Tariffs and Trade, the predecessor to the WTO during the FIFA World Cup 1986 hosted by Mexico (Rose & Spiegel, 2011).

Like discussed in the FDI section above, infrastructure is an important aspect for the host country prior the event. The preparation of the infrastructure is often the job of foreign-based MNEs from all around the world. This indirectly means that the import of the host

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country probably will increase because it works together with MNEs from all around the world. But host countries also want to promote a nation’s exports. For example, Preuss (2004) discusses how the Seoul Olympics in 1988 were intended to improve international relations between South Korea and the Soviet countries, as well as raise international awareness of Korean manufactured products, so as to promote Korean exports (Rose & Spiegel, 2011).

The results of Rose and Spiegel (2011) provide strong evidence for large positive effect after hosting an MSE on import, export and overall trade, “The Olympic trade effect” on export is large and positive. This effect is found for both Olympics as the FIFA World Cup. So hosting an MSE will lead to a higher level of trade (conceptual model). This led to the following hypotheses:

H3a: Hosting an MSE will lead to a higher level of international trade for the host country.

H3b: Hosting an MSE will lead to a higher level of import for the host country.

H3c: Hosting an MSE will lead to a higher level of export for the host country.

2.7 Emerging Markets

The last section of the literature review will discuss emerging markets. Is the MSE-effect different for emerging markets, for instance South Africa? First, emerging markets will be defined. Low-income, rapid growth countries using economic liberalization as their

primary engine of growth typifies emerging markets. Doing business in emerging markets is different than doing business in the home market (Crittenden & Crittenden, 2012;Hokisson et al., 2000). Different aspects are rules, regulations and market expectations. Entry into these markets tends to be easy however; it can be more difficult because of a weaker legal structure

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and fewer market players than in developed countries (Olson, 1996;Lynn et al., 2011). Another difference between emerging and developed countries is governance. According to Crittenden and Crittenden (2012) the critical driver of governance in emerging markets is economic turbulence. The results of Aron (2000) showed that in less developed economies institutions may be weak because rules are absent, suboptimal or poorly enforced. Weak institutions can also weaken economic growth (Gani, 2011). To attract FDI for developing countries it is important to improve their governance (Globerman & Shapiro, 2002).

Otherwise it is possible MNEs won’t invest in those countries. Cost-reduction strategies are reasons for MNEs to invest in emerging markets (Sethi et al., 2003). Over the years FDI inflows in emerging markets increased. In 2012 the amount of FDI inflows in emerging markets transcended the amount of FDI inflows in developed countries. According to United Nations Conference on Trade and Development (UNCTAD) Asian countries remained the largest sources of FDI, whereas the BRICS countries (Brazil, Russia, India, China, and South Africa) continued to be leader of FDI among emerging investor markets. The theory showed the difference between emerging markets and developed countries. This led to the following hypotheses:

H4a: There is a difference between emerging markets and developed countries for the MSE-effect FDI inflows.

H4b: There is a difference between emerging markets and developed countries for the MSE-effect economic growth.

H4c: There is a difference between emerging markets and developed countries for the MSE-effect international trade.

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3. Conceptual Model

Figure 1. Conceptual model

H1a H1b H1c H4a H2 H4b H3a H4c Mega Sport Event:

Economic growth (GDP growth)

International trade: FDI inflow

Country FIFA World Cup

Summer Olympics

Import

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4. Research Method

4.1 Data collection

This quantitative study is a database study. To analyze the effect of a Mega Sport Event (MSE) on the host country economy this study uses the database of the Worldbank. This study aims for MSEs (Summer Olympics and FIFA World Cup), the data will be used from countries like South-Africa, Germany, Japan, France (all FIFA World Cup) and United Kingdom, China, Greece, Australia (Olympic Summer Games). Unfortunately there is no South Korean data available, co-host of the FIFA World Cup 2002. According to Saunders et al. (2011), this data can be acquired through secondary sources as databases because sources are permanent, available, and the longitudinal studies may be feasible.

The data will be provided from the database of the Worldbank available at

http://data.worldbank.org/about/countryclassification. Data will be used from three years before the MSE took place until three years after. Including the year of the MSE itself there is a collection of seven years for each event. The choice of seven years is to get a good overview of the possible effect of this MSE. Because of the before and after measurement a difference in international economic activity of the host country can be tested. The data from the

Worldbank is only available until 2013, so for the United Kingdom, host of the 2012 Summer Olympics, this study looks only at one year after the MSE.

In this research there are several important variables that need to be measured: Foreign direct investment (FDI) inflows, economic growth (GDP growth) and international trade (import and export). These are all dependent variables that can be collected from the database of the Worldbank. The independent variable is MSE; FIFA World Cup or Olympic Summer Games. At last there is a moderation variable, the selection of the host country. In this study there is difference in the selection of the host countries: developed and emerging markets. For example South-Africa is an emerging country and Germany is a developed country.

The sample of the data collection from the Worldbank is exported to Microsoft Office Excel. Starting to provide for each country an excel file with all the data for that specific country. If all data is collected all files will put together to one excel file. This leads to the sample of this research and will be exported to SPSS 19.0 to analyze the data.

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4.2 Variables

As previously described there are three dependent variables: FDI inflows, economic growth (GDP growth) and international trade (import and export). For FDI inflows and international trade the percentage of the GDP is used. GDP growth is also measured in percentages. The independent variable is the MSE; FIFA World Cup and the Summer Olympics. The control variables are country size (population) and GNI/Capita. Table 3 displays the operationalization of all the variables of this study

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24 Table 3

Variables and sources

Variables Definition Source

Mega Sport Events (MSE) An MSE is a large or great sporting event. For instance, the Summer Olympics.

Horne and Manzenreiter (2006) Foreign direct investment (FDI) The average amount of Foreign 3 years before 3

years after the MSE. Foreign direct investment are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. This series shows net inflows (new investment inflows less

disinvestment) in the reporting economy from foreign investors, and is divided by GDP.

International Monetary Fund, International Financial Statistics and Balance of Payments databases, World Bank, International Debt Statistics, and World Bank and OECD GDP estimates.

Economic growth The average amount of GDP growth 3 years before and 3 years after the MSE. Annual percentage growth rate of GDP at market prices based on constant local currency. Aggregates are based on constant 2005 U.S. dollars. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.

World Bank national accounts data, and OECD National Accounts data files.

International trade The average amount of international trade 3 years before and 3 years after the MSE. Trade is the sum of exports and imports of goods and services measured as a share of gross domestic product.

Import The average amount of import 3 years before and 3 years after the MSE. Imports of goods and services represent the value of all goods and other market services received from the rest of the world. They include the value of merchandise, freight, insurance, transport, travel, royalties, license fees, and other services, such as communication, construction, financial, information, business, personal, and government services. They exclude compensation of employees and investment income (formerly called factor services) and transfer payments.

Export The average amount of export 3 years before and 3 years after the MSE. Exports of goods and services represent the value of all goods and other market services provided to the rest of the world. They include the value of merchandise, freight, insurance, transport, travel, royalties, license fees, and other services, such as communication, construction, financial, information, business, personal, and government services. They exclude compensation of employees and investment income (formerly called factor services) and transfer payments.

Emerging markets Countries with low-income, rapid growth countries using economic liberalization as their primary engine of growth.

Crittenden (2012)

Developed countries High income countries www.worldbank.org Country Size Refers to the total population during the MSE www.worldbank.org GNI/Capita GNI/Capita based on purchasing power parity

(PPP). PPP GNI is gross national income (GNI) converted to international dollars using purchasing power parity rates.

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5. Results

In this section of the study, an overview of the empirical analysis will be presented. At first, the descriptive statistics of all variables will be displayed. Secondly, the correlation of all variables will be presented. And finally, the hypotheses will be tested.

5.1 Descriptive statistics

The descriptive variables in this study are presented in table 4. To check whether the data was useful for this study a normality check was conducted. Several tests (Histogram, Shapiro, skewness and kurtosis) showed that the data was normally distributed. Some results in table 4 will now be discussed. In the period of 1995 to 2013 the average FDI inflows for the host countries was 42 billion dollars and the average percentages FDI of the GDP was 2,17 with a standard deviation of 10,79. According to the descriptive statistics (table 4) the average economic growth for the host countries during the period of 1995 to 2013 was 2,95 with a standard deviation of 14,166. For international trade the average for the host countries was 49,23 (percentages of the GDP) with a standard deviation of 85,97. This is divided in import (M = 24, 79) with a standard deviation of 40,04 and export (24,44) with a standard deviation of 45,92. For the control variable country size this study concludes that the country with the smallest population is 10,5 million (Greece) and biggest population is 1,4 billion (China). The average population of the host countries during the period of 1995 to 2013 was 211,9 million.

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26 Table 4.

Descriptive statistics of all numeric variables

Variable Mean SD Min Max N FDI inflows (in $) 42.304.321.691 6.628.329.3352 -2,50993E+10 3,47849E+11 160

FDI inflows (% of GDP) 2,17 2,14 -3,62 10,79 160

GDP (in $) 1,98419E+12 1,80139E+12 1,15482E+11 1,98419E+12 160

GDP growth (in %) 2,95 3,53 -8,86 14,166 160 International trade (% of GDP) 49,23 13,98 16,01 85,97 160 Import (% of GDP) 24,79 7,00 7,02 40,04 160 Export (% of GDP) 24,44 7,56 9,00 45,92 160

County size (population) 211.878.994 408.980.539 10.553.050 1.357.380.000 160

GNI/Capita 23776,50 11399,29 1630 45010 160

5.2 Correlation analysis

Before this study compares the analysis of the independent variable on the dependent variables a correlation matrix (table 5) is made between all the variables. This matrix shows the correlation between all the variables. This result is important for the next section of the analysis. There are only variables with an interval measurement in the correlation matrix.

The matrix shows there is a positive correlation between FDI inflows and GDP growth (r = 0,38, p < 0,001). This higher the level of FDI inflows, the higher the level of GDP

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growth. Also for FDI inflows and international trade the correlation is positive strong (r = 0,25, p < 0,001). So a higher level of FDI inflows will lead to a higher level of international trade. As expected, the correlation between international trade and import/export is positive strong (r = 0,96, p < 0,001) and (r = 0,96, p < 0,001). This strong correlation was expected because international trade consists of import and export. A notable correlation is the strong positive correlation between FDI inflows and country size (r = 0,33, p < 0,001). The means the bigger the size of the country, the higher the level of FDI inflows. All the correlations are presented in table 5.

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Table 5

Correlation matrix of all numeric variables

** correlation is significant at the 0.01 level (2-tailed) *correlation is significant at the 0.05 level (2-tailed)

Variable 1 2 3 4 5 6 7 FDI (% of GDP) 1 GDP growth (in %) ,38** 1 International trade (% of GDP) ,25** ,04 1 Import (% of GDP) ,20* -,04 ,96** 1 Export (% of GDP) ,28** ,12 ,96** ,84** 1

Country size (population ,33** ,72** ,72** -,10 ,14 1

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5.3 Comparing the international economic activity effect

After presenting the descriptive statistics and a correlation matrix now a comparison of the international economic activity of the host countries will be made. Australia (2000), China (2008), Greece (2004), and United Kingdom (2012) are Summer Olympics. France, Germany, Japan, and South Africa are FIFA World Cups. To test the hypotheses 1a, 1b, and 1c, the average international economic activity 3 years before the MSE, the year of the MSE and three years after the after the MSE were analyzed. Using this analysis the hypotheses will be tested. The study also provides a conceptual model (figure 7) including the results of the analysis. The conceptual model is showed in the next chapter.

5.3.1 FDI inflows

First, the dependent variable FDI inflows (% of GDP) of the host country will be discussed. The results are presented in table 6. For Australia the average FDI inflows increase from 1,36% (3 years before) to 3,28% (year of MSE) and three years after the MSE the average FDI inflows was 2,73%. This means an increase by 1,92% and 1,37% for the FDI inflows for Australia. The effect for China was different, the average FDI inflows decreases from 4,89% to 4,1% (year of the MSE) and 4,16% (3 years after the MSE). This means a decrease by 0,76% and 0,74%. The average FDI inflows of France increases from 1,47% to 1,95% and 3,27%. This means an increase by 0,48% and 1,80%. For Germany the average FDI inflows also increases from 1,27% to 2,92% and 1,32%. This means an increase by 1,65% and 0,5%. The effect for Greece is different, first a minimum increase from 0,22% to 0,23% and after three years a decrease to 0,14. Also for Japan the average FDI inflows

decreases from 0,20% to 0,15% and 0,15%. This means a decrease by 0,5%. The average FDI inflows for South Africa decreases from 2,74% to 0,98% and 1,46%. A decrease by 1,76% and 1,28%. For the last host country, the United Kingdom, the average FDI inflows increases

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from 1,38% to 2,56% and 1,80%. The average FDI inflows increase by 1,28% and 0,42%. If we look at the average FDI inflows of all the host country presented in table 6 the average FDI inflows increases from 1,69% to 2,03% and 1,88%.

Table 6

FDI inflows impact host countries

Host country Average FDI

inflows (% of GDP)

3 years before the

MSE FDI inflows (% of GDP) in the year of the MSE Average FDI inflows (% of GDP)

3 years after the

MSE Australia 1,36 3,28 2,73 China 4,89 4,13 4,16 France 1,47 1,95 3,27 Germany 1,27 2,92 1,32 Greece 0,22 0,23 0,14 Japan 0,20 0,15 0,15 South Africa 2,74 0,98 1,46 United Kingdom 1,38 2,56 1,8 All MSEs 1,69 2,03 1,88

According to the results of table 6 the average FDI inflows of all rubric MSEs increases, which means hypothesis 1a is supported. Analyzing at the MSEs separately the average FDI inflows will not increase for all the MSE, which means hypotheses 1b and 1c are rejected. In figure 2 the FDI inflows are presented of the host countries during the period of seven years (3 years before MSE, year of the MSE, and 3 years after the MSE).

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H1a: Hosting an MSE will lead to a higher level of FDI inflows for the host country. (Supported)

H1b: Hosting the Summer Olympics will lead to a higher level of FDI inflows for the host country. (Rejected)

H1c: Hosting the FIFA World Cup will lead to a higher level of FDI inflows for the host country. (Rejected)

Figure 2. FDI inflows (& of GDP) impact host countries

5.3.2 Economic growth

Second, the dependent variable economic growth in percentages (GDP growth) of the host country will be discussed. The results are presented in table 7. For Australia the average economic growth decreases from 4,46% (3 years before) to 3,87% (year of MSE) and three

-1 0 1 2 3 4 5 6 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 Australia China France Germany Greece Japan South Africa United Kingdom

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years after the MSE the average economic growth was 2,96%. This means a decrease by 0,59% and 1,5% for the average economic growth for Australia. The effect for China was the same, the average economic growth decreases from 12,71% to 9,63% (year of the MSE) and 9,65% (3 years after the MSE). This means a decrease by 3,08% and 3,10%. The average economic growth of France increases from 1,94% to 3,55% and 3,08%. This means an increase by 1,61% and 1,14%. For Germany the average economic growth increases but also decreases from 0,39% to 3,71% and -1,32%. This means an increase by 3,32% and a

decrease by 1,71%. The effect for Greece is similar, first an increase from 4,51% to 4,95% and after three years a decrease to 3,41%. For Japan the average economic growth first decreases from 0,80% to 0,29% and after three years increases to 1,78%. This means a decrease by 0,51% and an increase by 0,98%. The average economic growth for South Africa increases from 2,34% to 3,04% and 2,54%. An increase by 0,70% and 0,20%. For the last host country, the United Kingdom, the average economic growth increases from -0,25% to 0,66% and 1,73%. The average economic growth increases by 0,91% and 1,98%. If we look at the average economic growth of all the host country presented in table 6 the average economic growth first increases from 3,36% to 3,71% and after three years decreases to 2,98%.

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33 Table 7

Economic growth host countries

Host country Average economic

growth 3 years

before the MSE

Economic growth in

the year of the

MSE

Average economic

growth 3 years after

the MSE Australia 4,46 3,87 2,96 China 12,71 9,63 9,65 France 1,94 3,55 3,08 Germany 0,39 3,71 -1,32 Greece 4,51 4,95 3,41 Japan 0,80 0,29 1,78 South Africa 2,34 3,04 2,54 United Kingdom -0,25 0,66 1,73 All MSEs 3,36 3,71 2,98

The results of table 7 show that the average economic growth differs between the rubric host countries. If we look at the average of all rubric host countries we can conclude the average economic growth first increases and after three years decreases, which means hypothesis 2 is supported. The economic growth of all the host countries during the period of seven years is presented in figure 3.

H2: Hosting an MSE won’t lead to a higher level of economic growth for the host country.

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34 Figure 3. Economic growth (in %) host countries

5.3.3 International trade

Third, the dependent variable international trade (% of GDP) of the host country will be discussed. The results are presented in table 8. For Australia the average international trade increases from 38,97% (3 years before) to 40,90% (year of MSE) and three years after the MSE the average international trade was 41,80%. This means an increase by 1,93% and 2,83% for the average international trade for Australia. The effect for China was different, the average international trade decreases from 69,07% to 62,27% (year of the MSE) and 52,90% (3 years after the MSE). This means a decrease by 6,80% and 16,17%. The average

international trade of France increases from 44,92% to 49,01% and 52,94%. This means an increase by 4,09% and 8,02%. For Germany the average international trade increases from 66,02% to 77,12% and 77,10%. This means an increase by 11,10% and a decrease by 11,08%. The effect for Greece is different, first a decrease from 51,69% to 50,48% and after three years an increase to 53,75%. For Japan the average international trade increases from 19,77% to 21,12% and after three years increases to 24,59%. This means an increase by 1,39% and 4,82%. The average international trade for South Africa first decreases from

-10 -5 0 5 10 15 20 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 Australia China France Germany Greece Japan South Africa United Kingdom

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63,99% to 55,99% and 61,66%. A decrease by 4,00% and 2,33 %. For the last host country, the United Kingdom, the average international trade increases from 59,62% to 62,58% and 61,56%. The average international trade increases by 2,96% and 1,94%. If we look at the average international trade of all the host country presented in table 8 the average

international trade increases from 51,76% to 52,44% and 53,29%. This means an increase by 0,68% and 1,53%

Table 8

International trade impact host countries

Host country Average

international trade

3 years before the

MSE

International trade

in the year of the

MSE

Average

international trade

3 years after the

MSE Australia 38,97 40,90 41,80 China 69,07 62,27 52,90 France 44,92 49,01 52,94 Germany 66,02 77,12 77,10 Greece 51,69 50,48 53,75 Japan 19,77 21,16 24,59 South Africa 63,99 55,99 61,66 United Kingdom 59,62 62,58 61,56 All MSEs 51,76 52,44 53,29

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Looking at the average international trade of the rubric host countries during the period of seven years the international trade increases, which means hypothesis 3a is supported. Figure 4 shows the international trade of all the host countries.

H3a: Hosting an MSE will lead to a higher level of international trade for the host country. (Supported)

Figure 4. International trade (% of GDP) impact host countries

Fourth, the dependent variable import (% of GDP) of the host country will be discussed. The results are presented in table 9. For Australia the average import increases from 19,95% (3 years before) to 21,47% (year of MSE) and three years after the MSE the average import was 21,22%. This means an increase by 1,52% and 1,27% for the average import for Australia. The effect for China was different, the average import decreases from 30,86% to 27,28% (year of the MSE) and 24,67% (3 years after the MSE). This means a decrease by 3,58% and 6,19%. The average import of France increases from 21,44% to 23,21% and 25,70%. This means an increase by 1,77% and 4,26%. For Germany the average import increases from 30,71% to 35,94% and 35,62%. This means an increase by 5,23% and

0 10 20 30 40 50 60 70 80 90 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 Australia China France Germany Greece Japan South Africa United Kingdom

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a decrease by 4,91%. The effect for Greece is different, first a decrease from 31,14% to 29,70% and after three years an increase to 32,08%. For Japan the average import decreases from 9,27% to 9,11% and after three years increases to 11,46%. This means a decrease by 0,16% and an increase by 2,19%. The average import for South Africa decreases from 32,42% to 27,37% and 31,28%. A decrease by 5,05% and 1,14%. For the last host country, the United Kingdom, the average import increases from 30,78% to 32,33% and 31,72%. The average import increases by 1,55% and 0,94%. If we look at the average import of all the host country presented in table 8 the average import increases from 25,82% to 25,90% and

26,72%. This means an increase by 0,12% and 0,90%

Table 9

Import impact host countries

Host country Average import (%

of GDP) 3 years

before the MSE

Import (% of GDP)

MSE

Average import (%

of GDP) 3 years

after the MSE

Australia 19,95 21,47 21,22 China 30,86 27,28 24,67 France 21,44 23,21 25,70 Germany 30,71 35,94 35,62 Greece 31,14 29,70 32,08 Japan 9,27 9.11 11,46 South Africa 32,42 27,37 31,28 United Kingdom 30,78 32,33 31,72 All MSEs 25,82 25,90 26,72

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According the results of table 9 the average import of all rubric host countries increases during the period of seven years, which means hypothesis 3b is supported. The import of the host countries is presented in figure 5.

H3b: Hosting an MSE will lead to a higher level of import for the host country. (Supported)

Figure 5. Import (% of GDP) impact host countries

Finally, the dependent variable export (% of GDP) of the host country will be discussed. The results are presented in table 10. For Australia the average export increases from 19,02% (3 years before) to 19,43% (year of MSE) and three years after the MSE the average import was 20,58%. This means an increase by 0,41% and 1,56% for the average import for Australia. The effect for China was different, the average export decreases from 38,86% to 35,00% (year of the MSE) and 28,22% (3 years after the MSE). This means a decrease by 3,21% and 9,99%. The average export of France increases from 23,49% to

25,80% and 27,23%. This means an increase by 2,31% and 24,92%. For Germany the average import increases from 35,31% to 41,24% and 41,47%. This means an increase by 5,93% and a decrease by 6,16%. The effect for Greece is similar, an increase from 20,55% to 20,78% and

0 5 10 15 20 25 30 35 40 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 Australia China France Germany Greece Japan South Africa United Kingdom

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21,68%. For Japan the average export increases from 10,50% to 11,25% and after three years increases to 13,13%. This means an increase by 0,75% and 2,63%. The average export for South Africa decreases from 31,57% to 28,62% and 30,38%. A decrease by 2,95% and 1,19%. For the last host country, the United Kingdom, the average export increases from 28,86% to 30,25% and 29,84%. The average export increases by 1,39% and 0,98%. If we look at the average export of all the host country presented in table 10 the average export increases from 25,93% to 26,54% and 26,57%. This means an increase by 0,61% and 0,64%

Table 10

Export impact host countries

Host country Average export (%

of GDP) 3 years

before the MSE

Export (% of GDP)

MSE

Average export (%

of GDP) 3 years

after the MSE

Australia 19,02 19,43 20,58 China 38,21 35,00 28,22 France 23,49 25,80 27,23 Germany 35,31 41,24 41,47 Greece 20,55 20,78 21,68 Japan 10,50 11,25 13,13 South Africa 31,57 28,62 30,38 United Kingdom 28,86 30,25 29,84 All MSEs 25,93 26,54 26,57

Looking at the average export of all rubric countries we can conclude the average export increases (table 10), which means hypothesis 3c is supported. Figure 6 shows the

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export of all the host countries during the seven years (3years before the MSE, year of the MSE, and 3 years after the MSE).

H3c: Hosting an MSE will lead to a higher level of export for the host country. (Supported)

Figure 6. Export (% of GDP) impact host countries

5.3.4 Emerging Markets

In table 11 a comparison between emerging and developed countries is made. This table is made to check if there are any differences between emerging and developed countries. First, there is a difference for the FDI inflows between the host country. The table shows that the FDI inflows increase for four countries, those four countries are all developed countries; Australia, France, Germany and the United Kingdom. For the four other countries the FDI inflows decrease, including two emerging markets: China and South Africa. This means the effect for MSEs on FDI inflows is different for emerging markets and developed countries.

0 5 10 15 20 25 30 35 40 45 50 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 Australia China France Germany Greece Japan South Africa United Kingdom

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Results also differed for the economic growth for the host country. Again for four countries the economic growth increases, only now one emerging market: South Africa. For the other four countries the economic growth decreases, three developed countries: Australia, Germany, and Greece and one emerging market: China. Because of the effect on economic growth is positive and negative for emerging and developed countries this study can’t conclude there is a difference between emerging markets and developed countries.

Finally the dependent variable international trade will be discussed. The difference between emerging markets and developed countries is the biggest for this variable. The international trade increases for six host countries, all developed countries: Australia, France, Germany, Greece, Japan, the United Kingdom. For two countries the international trade decreases, both emerging markets; China and South Africa. This means there is difference between emerging markets and developed countries looking at international trade.

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42 Table 11

Comparison emerging markets and developed countries

Host Country FDI inflows increases FDI inflows decreases Economic growth increases Economic growth decreases International trade increases International trade decrease Australia X X X China X X X France X X X Germany X X X Greece X X X Japan X X X South Africa X X X United Kingdom X X X

H4a: There is a difference between emerging markets and developed countries for the MSE-effect FDI inflows. (Supported)

H4b: There is a difference between emerging markets and developed countries for the MSE-effect economic growth. (Rejected)

H4c: There is a difference between emerging markets and developed countries for the MSE-effect international trade. (Supported)

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6. Conceptual model

Figure 7. Conceptual model including tested hypotheses

H1a: S H1b: R H1c: R H2: S H4b: R H4a: S H3a: S H4c: S H3a: S H3c: S Mega Sport Event:

Economic growth (GDP growth)

International trade: FDI inflow

Country FIFA World Cup

Summer Olympics

Import

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7. Discussion

In this last section all the results from the previous section will be summarized and discussed. The limitations of this paper will be addressed and potential future research subjects are provided. Finally, a conclusion of the study will emphasize the most important findings of this paper.

7.1 Discussion of the results

The aim of this thesis was to study if Mega Sport Events (MSE) influence the international economic activity of the host country. According to Brune and Garrett (2005) international economic activity consists of foreign direct investment (FDI) inflows, economic growth (GDP growth), and international trade (import and export). Those three aspects of international economic activity were the dependent variables of this study. MSE was the dependent variable and country size and GNI/Capita are the control variables. Finally a comparison is made between emerging and developed countries. To check if the data, from the Worldbank, was valid and useable the descriptive statistics and a correlation matrix were made. After this step the hypotheses were tested.

First, the effect of an MSE on the FDI inflows of the host country. The results show that the FDI inflows for Australia increase during the year of the MSE and increase the three years after the MSE. The relation between the MSE and FDI inflows is positive for Australia. The result for China is different, FDI inflows of the year of the MSE and the three years after the MSE decrease from three years before the MSE. This means there is no positive relation between MSE and FDI inflows for China. It could also mean that the FDI inflows were higher before the Olympic Games because of the preparation of the Olympics, for example due to building the infrastructure. For the FIFA World Cup in France, there is a positive relation

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between the MSE and FDI inflows. The FDI inflows increase in the year of the tournament and the three years after. This also accounts for the 2006 FIFA World Cup in Germany. The FDI inflows increase in both periods. The 2002 FIFA World Cup did not work out for Japan, talking about FDI inflows. The FDI inflows decrease in the year of the tournament and the three years after. There was a negative relation between the MSE and FDI inflows. The result for the 2010 FIFA World Cup in South Africa. A big decrease of FDI inflows in the year of the tournament. In this case it is also possible that the FDI inflows were higher prior to the tournament because of the preparation. Finally the FDI inflows of the United Kingdom increase in the year of the 2012 Summer Olympics and the three years after. So there is a positive relation between the MSE and the FDI inflows. The results show that the overall effect of an MSE on FDI inflows is positive, which means hypothesis 1a is supported. This effect is not visible for all the Olympics or FIFA World Cups separately. So hypotheses 1b and 1c are rejected.

Secondly, the economic growth (GDP growth) of the host country. The 2000 Summer Olympics in Sydney is not that good for the economic growth for Australia. The economic growth decreases in the year of the Olympics and in the three years after. So there is a negative relation between the MSE and economic growth. The same results were found for 2008 Summer Olympics in Peking, the economic growth also decreases in the year of the Olympics and the three years after. The 1998 World Cup Foot was good for France, if we talk about economic growth. The economic growth increases in the year of the tournament and the three years after. There is a positive relation between the MSE and economic growth. For the 2002 FIFA World Cup in Japan and the 2006 FIFA World Cup the relation between the MSE and economic growth were negative. In both countries the economic growth decreases in the year of the tournament and the three years after. A notable result is the economic growth in Greece increases in the year of the Olympic but decreases the three years after. The relation

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between the MSE and economic growth for South Africa, and the United Kingdom is

positive. This means in both countries the economic growth increases in the year of the MSE and the three years after. Looking at the overall effect of the rubric host countries this study concludes the economic impact increases in the year of the MSE and decreases the three years after, which means hypothesis 2 is supported.

Third, the international trade (import and export) of the host country. The results show a positive relation between the MSE and international trade for Australia, France, Germany, Greece, Japan, and the United Kingdom. This means in all those countries the international trade increases in the year of the MSE and the three years after. There was a negative relation between the MSE and international trade for China and South Africa. The international trade decreases from the three years before the MSE took place. Looking at international trade separately, import and export, the results show the same result as international trade as a whole, which is quite logic because international trade consists of import and export. This means hypotheses 3a, 3b, and 3c are supported.

Finally a comparison between the emerging markets and developed countries is made. Is the MSE-effect different for a country like China? The results show that for FDI inflows there is quite a difference, there was no positive effect for the emerging markets China and South Africa (BRICS). There was a positive effect for the developed countries Australia, France, Germany and the United Kingdom. For Japan and Greece the effect was negative. For economic growth it is hard to say if there is a difference between emerging markets and developed countries because the effect for China was negative, similar to the most developed countries, and the effect for South Africa was positive. For international trade the difference was very clear, a positive effect for all the developed countries and a negative effect for the two emerging markets, China and South Africa. So this means a difference for emerging

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markets and developed countries talking about international trade. This means hypotheses 4a and 4c are supported and hypothesis 4b is rejected.

On the basis of the results of this study, it can be concluded that the overall level of international economic activity will increase if a country is hosting an MSE and there are a differences between emerging markets and developed countries. This means this study has answered the following research question and sub-questions:

What is the effect of a Mega Sport Event like the FIFA World Cup or the Summer Olympics on the international economic activity of the host country?

Sub-questions:

• What is the effect of a Mega Sport Event on the foreign direct investment inflow of

the host country?

• What is the effect of a Mega Sport Event on the economic growth of the host country? • What is the effect of a Mega Sport Event on the international trade (import and export)

of the host country?

• Are these effects different between emerging and developed countries?

A few limitations for this study need to be taken in consideration. First, the FDI of the host country, there is only an analysis of the FDI inflows and not of the FDI outflows. It might be possible an MSE can also influences the FDI outflows of the host country. Second the used data wasn’t complete, for instance the 2002 co-host South Korea is missing in the dataset. Unfortunately there was no data available at the Worldbank. And for the United Kingdom there was no data available for the second and third year after the Olympic. Third, when more countries are included into the dataset, the results can be more generalized.

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Finally, it is difficult to find evidence that only an MSE affect the international economic activity of a host country. More aspects influence the international economic activity for a country. Especially economic growth is influenced by many aspects, for instance political stability. The evidence for the relation between the MSE and FDI outflow is a topic for further research and it would be also good if the dataset of further research is bigger than this study.

7.2 Conclusion

Although three out of ten hypotheses in this study were rejected, some important conclusions can be made based on the results. First of all, the consisting literature on the relation between MSEs and FDI inflows is confirmed. Hosting an MSE will lead to a higher level of FDI inflows (Ritchie & Aiken, 1984;Ritchie & Yangzhou, 1987;Getz, 1991;Spilling, 1994;Spilling, 1998;Jakobsen et al, 2012). According to this study all the papers are confirmed. Although the results show that the relation only occurs looking at all the MSEs as a whole. Looking at the Summer Olympics and the FIFA World Cup separately the level of FDI will not be higher for every tournament. Second, according to the consisting literature the economic impact of MSEs detect no statistically positive relation between MSEs and economic growth (Baim, 1992;Rosentraub, 1994;Baade, 1996;Noll & Zimbalist,

1997;Waldon, 1997;Coates & Humphreys, 1999;Coates & Humphreys, 2003). These papers are confirmed by this study. Hosting an MSE will not lead to a higher level of economic growth. Finally, the relation between MSEs and international trade (import and export). According to Rose and Spiegel (2011) there is strong evidence of large positive effect hosting an MSE on both import and export and overall trade, the “Olympic trade effect” on export is large and positive. This effect is found for both the Summer Olympics as the FIFA World Cup. Also these findings are confirmed by this study. Hosting an MSE will lead to a higher

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level of international trade. This relation also consists if we separate international trade in import and export.

An important contribution of this paper is to provide a better understanding about the relation between MSEs and the international economic activity of the host country. But the most important contribution of this study is testing if these relations above differ between emerging markets and developed countries. The results show that for FDI inflows and international trade the relations are different between emerging markets and developed countries. For developed countries hosting an MSE will lead to a higher level of FDI inflows and international trade. This relation is different for emerging markets because hosting an MSE will not lead to a higher level of FDI inflows and international trade for emerging markets. For economic growth there is no different relation between emerging markets and developed countries.

Overall, the main conclusion that can be drawn based on the results of this study is that hosting an MSE will lead to a higher level of international economic activity for the host country. However, this effect is mainly limited for the developed countries. So unfortunately the chance that the upcoming 2016 Summer Olympics in Rio Janeiro, the emerging market Brazil, will lead to a higher level of international economic activity is small.

Do Mega Sport Events create international economic activity in the host country? : a quantitative study focuses on the effect of Mega Sport Events on the international economic impact of the host country with a comparat