The Impact of Geopolitical Risks on Tourism Supply in Developing Economies: The Moderating Role of Social Globalization

Yan Zeng,Cheng Yan,Zhibin Lin,Marco Chi Keung Lau,Giray Gozgor

doi:10.1177/00472875211004760

Abstract

Capital investment is vital for sustainable tourism growth, particularly in times of geopolitical turmoil. This study examines how tourism investment was influenced by geopolitical risks considering social globalization as a moderating factor. Data were collected from 18 developing economies between 1995 and 2018. The results from the fixed effects and the least squares dummy variable–corrected methods show that the geopolitical risks negatively affect capital investment in tourism, with social globalization playing a moderating role in alleviating the adverse effect. The results were robust to different measures and analyses. The study advances our understanding of sustainable tourism growth amid geopolitical turmoil. Policymakers, especially those from developing economies, are suggested to be vigilant about the media atmosphere of geopolitics and enhancing social globalization as a countermeasure against politically turbulent times. The study also provides implications for alleviating the impact of the global pandemic on tourism investment.

Highlights

It is well recognized that the tourism industry is susceptible to geopolitical turmoil, natural disasters, and health crises such as the current COVID-19 pandemic (Dahles and Susilowati, 2015; Seabra et al, 2020)
Column 1 illustrates the baseline model results (Model 1) and reports that a 1% rise in the GPR index yields a 0.21% reduction in Capital Investment in Travel and Tourism (CITT) at the significant level of 1%. This suggests that tourism investment is sensitive to geopolitical risk fluctuations: the higher the geopolitical risks, the lower the capital investment in tourism, consistent with our central hypothesis
Our work's main objective was to examine the effect of geopolitical risks on capital investment in tourism and how social globalization influences the impact

Summary

Introduction

It is well recognized that the tourism industry is susceptible to geopolitical turmoil, natural disasters, and health crises such as the current COVID-19 pandemic (Dahles and Susilowati, 2015; Seabra et al, 2020). Given the importance and uniqueness of the tourism investment patterns amid geopolitical turmoil for sustainable tourism growth, the impact of geopolitical risks on tourism investment requires prompt research attention. Geopolitical risk refers to the risk that is associated with conflicts between states competing for territory. This study examines the effects of geopolitical risks on capital investments in the supply side of tourism, considering the role of social globalization, which may alleviate the negative impact of the geopolitical risks on tourism investment. Our central hypothesis is that a surge in the geopolitical risks level causes a decrease in tourism investment as capital is mainly profit-driven and susceptible to geopolitical risks. The GPR index is comparable across the countries, an ideal measure for analyzing its impact on travel and tourism investments across countries. We investigate the moderating role of social globalization via employing the special indices of social globalization collected from three different dimensions

Objectives

Results

Conclusion