The Influence of Outcome-Based Ethical Performance on Foreign Direct Investment and Tourism Flows

A Panel Data Study

Abstract

The study aims to analyze how ethical performance measured by outcomes influences Foreign Direct Investment (FDI) and the tourism industry. It takes its theoretical ground from teleological ethics which is the school of thought that judges ethical conduct solely on the basis of its measurable outcomes and not the related intentions. The research views ESG results as signals of the site's attractiveness which affect the inflow of capital and tourists thus they look beyond the ESG disclosures at the company level. The research employs a quantitative, explanatory research design comprising 20 countries’ panel data analysis covering the period 2011 to 2022 and applying fixed-effect and random-effect models, and conducting Hausman test for model selection. The results reveal that there is a considerable impact of ethical results on FDI and tourism while the extent of the impactful differences is quite pronounced between developed and developing countries. In developing countries, the best infrastructure and reliable institutions are the major factors attracting foreign direct investments (FDI) while for tourism the government policy and other factors related to the environment are the main influencers. On the other hand, in developed countries, social welfare and the quality of economic institutions primarily move the tourists, while foreign direct investment remains relatively immune to short-term ethical changes. The findings present a teleological view in which both the tourists and the investors are guided by the measurable ethical outcomes indicating trust, sustainability, and a low risk.