The dependent variable is the number of FDI projects in construction
of new hotels or expansion of existing ones. Other studies
have used the share of foreign hotels to total hotels as the measure
of degree of internationalisation (Brida, Driha, Ramon-Rodríguez, &
Scuderi, 2015). Assaf et al. (2015) employ the number of international
hotel rooms per capita of host country. Our measure is a flow
measure rather than a stock measure. The empirical specification of
the FDI gravity equation takes into consideration a wide range of
potentially relevant host-country determinants of FDI. As outlined
above, these variables include market size, GDP per capita, business
regulation, cost-based factors (such as labour costs and corporate
taxes), and FDI restrictions. The FDI gravity equation with fixed
effects is specified as follows: