When does ESG support outward investment? Amplifying, restricting, and substituting conditions in tourism firms

This study examines whether, and under what conditions, the environmental, social, and governance (ESG) performance of tourism firms is linked to their outward foreign direct investment (OFDI). Drawing on institutional and upper echelons theories, we propose that ESG may serve as a legitimacy signal abroad, and that its value depends on three boundary conditions: CEO foreign experience may amplify it, chair political connections may restrict it, and foreign ownership may substitute for it. Using an unbalanced panel of 55 listed Chinese tourism firms over 2009–2019, we find that ESG performance is positively associated with subsequent OFDI, an association that is concentrated mainly in a higher likelihood of investing abroad and is consistent with a legitimacy-based explanation. Chair political connections consistently weaken this association, including among hospitality and tour-attraction firms; foreign ownership weakens it only tentatively, and we detect no moderating role of CEO foreign experience. The study clarifies when sustainability performance is linked to tourism firms’ international expansion, while cautioning that greater overseas investment should not be equated with sustainable investment. For managers and policymakers, the results suggest that the link between ESG and international expansion depends on firms’ governance context, particularly their board chairs’ political connections.