The Performance Effects of Interorganizational Human Resource Practices : The Case of Inter-Club Networks in Professional Baseball, 1919-1940

This study investigates the performance effects of two industry-specific human resource management innovations that dramatically changed the way professional baseball teams selected and trained ballplayers. In the early part of this century major league clubs developed and refined two player development practices based on “reserve team” and “farm team” systems. We use a panel data set of the win/lose records for the population of 16 major league clubs for the seasons from 1919 through 1940 to test hypotheses about the effect of human resource practices on organizational performance. The results suggest the reserve team practice had no significant impact on organizational performance. In contrast, the more complex farm team system, pioneered by Branch Rickey of the St. Louis Cardinals, improved organizational performance and diffused rapidly throughout the league. Four years after creating a farm team system, we estimated that it improved a team's win rate by .068 points relative to non-adopters of the farm team system and teams with less than four years of prior experience with a farm team system. The results also show the farm team effect was not confined to St. Louis but was also experienced by later adopters. These results contribute to the growing literature showing a positive effect of human resource policies on organizational performance. The results also illustrate the important role the external environment plays in shaping this relationship (e.g., legal restrictions to labor mobility)