With the 2022 Winter Olympics around the corner, people once again are wondering whether it makes economic sense to host them. Problematically, “economic sense” is subjective and relative. That, combined with a changing narrative about how the Games purportedly benefit a host region, makes the decision to bid for a mega-event—and the hosting of one effectively—all the more complicated.
Most economists agree that hosting the Olympics does virtually nothing to increase jobs, wages and local businesses’ taxable sales. By that logic, hosting the Games doesn’t make economic sense because the money spent to hold the Olympics exceeds the revenue it is likely to bring in. Simple enough. But, lately, Games organizers argue that it is not the immediate returns that make hosting worthwhile. Rather, they assert hosting an event is beneficial for innovation and entrepreneurship, which are universally tied to long-run economic development.
Does this assertion hold any water? Some research would support that idea, albeit tenuously. For example, hosting mega-events has been tied to increases in Foreign Direct Investment inflow and exports of high-technology products and services. Brazil saw a jump in the average size of venture capital deals relative to other tech-heavy locales in South America when it hosted the FIFA World Cup in 2014 and the Summer Games in 2016. More recently, the KOSPI and KRX indices saw a jump in market cap after South Korea was announced as the 2018 Winter Games host. Leading the way in that increase was the Information Technology sector.
But these outcomes don’t happen by accident. What can hosts (or aspiring hosts) do to ensure that they promote innovation and entrepreneurship? First, local governments need to create a regulatory environment that rewards entrepreneurship, such as strengthening IP protection, removing financial and bureaucratic entry barriers, and lowering taxes on small businesses. Second, Games planners should engage entrepreneurs from the early phases of Bid Book development. Doing so will allow the host nation to diagnose local stakeholder capabilities and design an event plan that ensures maximum engagement with local entrepreneurs, while actively negating the marginalization commonly faced by these groups. Third, there ought to be a focus on fostering the development and implementation of technical skills and practical education relevant to innovation and entrepreneurship among local residents. If hosts can accomplish these objectives, there is an outside chance that they may reap long-term developmental benefits from hosting a mega-event.
Ted Hayduk III is an assistant professor at NYU’s Tisch Institute for Global Sport