The Theory of Endogenous Growth

It’s been a long-held belief that growth of any business or economy is reliant on exogenous, or external, factors such as cash or government policy. Endogenous Growth theory holds that investment in human capital ( such as players), innovation (new training methods), and knowledge (player and performance analysis) are actually significantly bigger contributors to economic growth than influxes of external investment (sponsorship and TV money). The theory also focuses on positive externalities (positive performances by our national sides) and spill-over effects of a knowledge-based economy (social media) which will lead to economic development.

Not convinced? OK, let’s look at two examples from recent seasons. Leicester City certainly weren’t the biggest spenders in 2015/16 pre-season, nor did they have the “best” manager. Yet they ended up winning the Premier League. Why? Partly because the traditional biggest challengers all went into meltdown (or “transition” as they would call it) but also because they invested internally into player recruitment, new training methods and had some luck in avoiding serious injuries and suspensions to key players. As the season progressed, the squad believed that they could upset the 5000/1 odds on winning their first ever Premier League and the team mentality became stronger – they stopped being a team of individuals and became a collective team. With a manager at the helm who knew how to get the best out of the players, without resorting to upsetting the balance in the squad by spending money, they epitomised the theory of endogenous growth perfectly.

Down in the Non-Leagues we all admired the superb season that Bognor Regis Town had, reaching the Play-offs and the semi-finals of the FA Trophy in 2014/15 where they narrowly lost to Grimsby Town, then destined to return to the Football League. They played more games that season than any other Isthmian League side, yet only used 26 players in the process. Granted, that requires some serious luck with injuries but it also reflects on the skill of their manager at the time, Jamie Howell, and his coaching team in knowing how to cut his cloth according to the budget he was given at the start of the season. Whilst they would have earned around £35,000 in prize money from their run in the FA Trophy alone, the timing of that cash would have not allowed Jamie to spend much of it, thus relying on the internal investment to carry his team forward.

Football today is awash with cash at the top level, especially now that the TV deals have been renegotiated. At the Non-League level we will see little of that cash trickle down and so it is up the individual clubs to generate our own revenues, not relying on someone else to “bail us out”. And that, ladies and gentlemen, is The Theory of Endogenous Growth in a nutshell – success comes from within rather than with the help of external investment.

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