Resource deprivation, decision stakes, and the selection of foreign players in the NBA draft

Abstract

ABSTRACT This study examines the way resource endowments and decision stakes influence the managerial decision to select a foreign player during the NBA’s amateur draft. Building on evidence that general managers perceive foreign players to be riskier draft choices and on risk sensitivity theory, this study tests hypotheses that NBA teams accept greater uncertainty and risk associated with selecting foreign players in response to indicators of resource deprivation – payroll disadvantage and poor team performance. A regression analysis of 900 NBA draft selections, 2006–2020, provides mixed support for these hypotheses. Teams tend to select more foreign players later in the draft when the stakes of the decision are lower, and payroll disadvantage increases teams’ propensity to select foreign players. Evidence that poor team performance increases teams’ propensity to select foreign players is marginal. Further, the effect of payroll disadvantage tends to decrease across the draft’s first round in conjunction with the decrease in the stakes of each pick. However, the influence of payroll disadvantage appears to remain constant across the second round where NBA rules do not provide contract guarantees to players. In sum, this study adds to the growing bodies of sport management research on risk behavior, foreign players, and the amateur draft.