The Performance Effects of Human Resource Practices: The Case of Interclub 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 that 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. We estimate that by 4 years after its creation, the farm‐team system improved a team's win rate by 0.068 points relative to nonadopters of the farm‐team system and teams with less than 4 years of prior experience with a farm‐team system. The results also show that the farm‐team effect was not confined to St. Louis but also was 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).