The Intriguing Correlation Between Financial Investment and Formula 1 Racing Performance

Abstract

This paper examines the intriguing correlation between financial investments and the performance in Formula 1 motorsport racing, underscored by prominent athlete Lewis Hamilton’s leave from Mercedes Petronas to Scuderia Ferrari beginning in 2024. Using the data from 1994 to 2010, this paper identifies a clear link between financial allocation to F1 teams and their success in races. Overall, the paper reveals that teams backed by significant investments from their parent companies, such as Daimler for Mercedes and Ferrar for Scuderia Ferrari, tend to secure a leading position in the F1 Constructors’ Championship. The research further extends to operational spending in respective teams. This includes updating the newest technologies to augment their cars’ performance. The paper outlines the critical margin of Advantage held by Mercedes over Red Bull, mainly attributed to their significantly high expenditure, proving the causation in investment and performance. The research goes into depth by evaluating racers’ salaries and their performance metrics, suggesting a pattern where higher earning aligns with a more preferable result. Sponsorship investments are also mentioned and have proven to play a pivotal role, with well-sponsored teams typically finishing higher each season. In summary, the paper argues that financial investment is a critical determinant of a team’s capacity for dominance in Formula 1 racing. While driver skill is essential, the financial contributions explain its influence on performance, offering insights into the broader implications of financial strategies in high-stakes competitive sports.