Institutional Assurance, Innovation Environment, and Ecological Sustainability of Inbound Tourism: The Trade-Cost Channel

Abstract

The rapid growth of inbound tourism has brought economic benefits to China but has also increased ecological pressure on destination regions. Foreign visitors now rely heavily on digital services during their trips, yet the effectiveness of these services depends on institutional assurance and innovation capacity. This paper examines how institutional assurance and the innovation environment relate to the ecological sustainability of China's inbound tourism, and whether trade costs act as a transmission mechanism. Using panel data from 22 major tourism source countries over 2004–2024 (excluding 2020–2022), we construct an Institutional Assurance and Innovation Environment (IAI) index from three indicators: Information and Communication Technology (ICT) regulation, rule of law, and innovation output, combined through principal component analysis (PCA). The index is validated by the Kaiser–Meyer–Olkin measure and Bartlett's test of sphericity, and the models are estimated with country fixed effects. The results show that a stronger IAI is associated with higher inbound tourism performance and lower trade costs, and that lower trade costs are in turn associated with better tourism performance. A Sobel test supports the mediating role of trade costs (z = 3.96, p < 0.001), and the findings remain stable under an equal-weighted index and component-level regressions. Because lower transaction frictions reduce redundant travel arrangements and inefficient resource use, institutional and innovation conditions can support more sustainable tourism through better service coordination and more efficient destination management, helping China balance tourism growth with ecological conservation.