The speed of human capital formation in the baseball industry: the information value of minor-league performance in predicting major-league performance

Using a data set of well over 1200 different pitchers covering an almost 20-year time period, this paper reveals that the process of human capital formation for professional baseball pitchers is relatively slow, rendering minor league statistics to be of limited value when projecting major league performance. This indicates that a considerable amount of the performance differences across pitchers at the major league level are revealed only after they reach the majors, and hence is unforeseen given their minor league statistics. These findings illustrate just how difficult it is for all organizations to predict the future success of their apprentice-level employees. Even in an industry such as baseball—where employee output is easily measurable and highly quantifiable, and where the nature of the work at the developmental level is identical to that at the advanced level (i.e. pitching a baseball)—apprentice-level performance only provides modest insights into how that employee will ultimately perform at the advanced level. Thus, firms that erroneously overestimate the importance of apprentice-level performance are at risk of making systematic errors in personnel decisions.