The Effect of a Sports Institution’s Legal Structure on Sponsorship Income: The Case of Amateur Equestrian Sports in Germany

Abstract

Choosing the legal structure of a sports institution is one of the key decisions that sports managers must make. Using platform theory and property rights theory, this paper shows that the choice of legal structure influences the revenue composition of sports institutions. We hypothesized that member associations should receive higher sponsorship revenues than private firms because their legal structure offers better protection against hold-up for sponsors and also for customers/members, which in turn leads to increased attention for the sponsor. We tested this prediction using quantitative data from a nationwide online survey of equestrian sports institutions in Germany. In 2009, n=574 private firms and n=1,165 member associations completed the same questionnaire. Regression analyses were run to determine whether the legal structure has an impact on sponsorship income. The results confirmed the hypothesis that the legal structure has a significant impact on sponsorship income.