The Impact of the Institutional Environment on the Geographic Diversification of Chinese Tourism Firms

Geographic diversification is an important strategy for tourism firms to expand and grow. Taking a sample of Chinese listed tourism companies from the period 2008 to 2014, this study investigates the influences of local institutional environments on firms’ geographic diversification decisions. First, the findings show the significant positive impacts of institutional factors on tourism companies’ geographic diversification decisions, including the overall degree of marketization, the relationship between local governments and the market, and the development degree of the product or market factor. Second, the results of the moderating effects of the business type show that tourism firms operating a non-natural or historic business have a high possibility of diversifying across regions if they locate in regions with a high degree of marketization, a loose relationship between local governments and the market, and a developed non-public economy or a developed product market. Furthermore, the degree of geographic diversification of these firms increased more significantly as they operated in a developed product market. Finally, based on the above findings, both the academic and practical implications are discussed.