Salary Cap, Organizational Gap, and Catch-up in the Performance of NBA Teams: A Two-Stage DEA Model Under Heterogeneity

Abstract

This paper evaluates National Basketball Association teams performance using a two-stage approach under a metafrontier framework. Our approach decomposes overall efficiency into salary-cap and on-court efficiency. Organizational gaps between different organizational structures are calculated as well. The introduction of the salary cap as an important element for a competitive market preventing monopoly formation allows the examination of the effects on different types of performance. Findings reveal that teams experience increased performance while organizational gaps decline. Moreover, a b e t a and s i g m a convergence analysis reveals convergence patterns. Finally, the catch-up index denotes that the speed of convergence increases, especially after the salary cap policy implementation.