Chequered Flag or Red Flag:
Survival Analysis of
Formula One Teams
Asst. Prof. Onur Burak CELIK
Yasar University
Department of Economics
Izmir, Turkey
Objective
2

To explore the determinants of duration time
(measured in years) of Formula One teams
using proportional hazard (PH) survival
models.

Data set from 1981 to 2015, 35 seasons.
Formula One
3




First technically regulated (Formula) season in
1947.
Drivers’ Championship title in 1950.
Constructors’ Championship title in 1958.
Multi-billion dollar industry, ranking behind FIFA
World Cup and Summer Olympic Games.
 F1
generates more revenue per event than any
other sport in the world. (Deloitte, 2008)
 $1.7 billion revenue in 2013.

Teams became constructors in 1981.
Formula One
4
Source: Telegraph.co.uk (Nov, 2014)
Formula One
5
Formula One
6

Team budgets range from $90 million to $500
million annually.

Technology War: Only about 5% of the
thousands of components comprising an F1
car carry over from one year to the next
(Solitander and Solitander, 2010).
Formula One
7

Invention of Futuristic Technology
 Carbon
fiber chassis
 Disk brakes
 Traction control systems
 Multi-function steering wheels
 Paddle shifters
 Kinetic Energy Recovery System (KERS)
Formula One
8

From 1995 to 2006, Mercedes-Benz doubled
its road car sales and the share of the silvercolored cars sold increased from 22% to 47%,
which is also the color of McLaren-Mercedes
F1 cars (Judde et al. 2013).
Formula One
9

From 2010 to 2014, Red Bull has gained an
estimated $1.6 billion in Advertising Value
Equivalent (AVE), the price it would have to pay to
buy a similar amount of on-screen exposure, from
F1, which alone offsets the $1.2 billion it has
spent on Red Bull Racing as well as its
investment in Toro Rosso team.

In addition, Red Bull sold 5.2 billion cans in 2012
giving it record revenue of $6.7 billion, up 15.9%
over the previous year. (Forbes, 2014)
Formula One
10

Bankruptcy
 HRT

(Hispania Racing Team)-2012
Sportive failure
 BMW-2009

Global economic crisis
 Honda
and Super Aguri-2008.
 Toyota-2009.

Fatal accident
 Mercedes-1955:
83 spectators and the driver
died.
 Honda-1968: Driver was killed.
 Lola-1975: Team personnel were killed in an air
Data Set
11
8
7
Exit
6
5
4
3
2
1
0
1950-1980: 92 exits, 2.97 exits per season
1981-2015: 64 exits, 1.83 exits per season
Data Set
12




70 teams since 1981.
61 failures.
Total time at risk since 1950 for the teams that
existed from 1981 to 2015 is 596.
Total time at risk during observation period is
462.
Survival Analysis
13
Proportional Hazards
14
hi(t|Xi) = h0(t) exp(β’Xit)




Cox:
h0(t)
Exponential:
Gompertz:
Weibull:
No distribution assumption for
h0(t) = exp(β0)
h0(t) = exp(β0) exp(ϒt)
h0(t) = p tp-1 exp(β0)
Kaplan-Meier Survival Estimate
1.00
15
0.00
0.25
0.50
0.75
Median duration time=5 years
Mean duration time=8.5 years
0
10
20
30
40
Years
50
60
70
Results
16
Variable
Cox
Exponential
Gompertz
Weibull
0.0768***
(0.0537)
0.082***
(0.0572)
0.0903***
(0.0577)
0.0884***
(0.0565)
0.0517***
(0.0357)
0.0618***
(0.0419)
0.046***
(0.0313)
0.0484***
(0.0332)
0.494**
(0.1386)
-
0.718***
(0.0894)
-
0.5124***
(0.0984)
-
0.596***
(0.0921)
-
-
0.435**
(0.1794)
-
0.7045**
(0.0976)
-
0.5626***
(0.1125)
-
0.6016***
(0.1045)
2008 Crisis
2.469*
(1.1737)
2.503*
(1.1912)
2.212*
(0.9747)
2.299*
(1.0104)
3.2241**
(1.5279)
3.005**
(1.4071)
3.128**
(1.445)
3.2035**
(1.4825)
Base in UK
1.534
(0.434)
1.482
(0.4146)
1.431
(0.3859)
1.395
(0.3747)
1.6689*
(0.4629)
1.4632
(0.3945)
1.719*
(0.4774)
1.5658
(0.4276)
Akaike IC
377.5668
378.2549
163.9278
164.4063
158.8759
162.7384
155.6753
158.3068
Bayesian IC
394.1091
394.7972
184.6056
185.0841
183.6893
187.5517
180.4887
183.1202
-
-
-
-
ϒ=0.078
ϒ=0.049
p=1.417
p=1.349
% completed
Drivers’
Championshi
p
Constructors
’
Championshi
p
Shape
Parameter
Results
17

Insignificant variables:
 Location
dummy for being based in Italy
 Being backed by a car manufacturer
 Being backed by an international company
 Tire wars
 Number of teams
 Deviation of percentage points scored
(Competitive Balance)
Conclusion
18
“To finish first, first you have to
finish”
Ron Dennis
Former McLaren International
Formula One team director