Tax Incentive Mediates Foreign Direct Investment Determinants and Hotel Performance in Arusha Tanzania.

Abstract:

This study seeks to explain the mediation effect of tax incentives on the relationship between ownership advantage (OWA), location advantage (LA), and internationalization (INT) factors determining Foreign direct investment (FDI) on hotel performance (HP). The study proposes the mediation model of tax incentives and FDI toward hotel performance in the Arusha region, of Tanzania. The proposed order of the model is that foreign direct investment depends on OWA, LA, and INT which may become applicable through tax incentives and tax incentives may further predict hotel performance. The measurement scale was borrowed from different studies and responded Includes hotel owners, managers, executive officers, and employees. Data were collected from August 2022 to February 2023; whereby 257 filled questionnaires were gathered and 236 were usable for further analysis. Final questionnaires were analyzed using SPSS and Structural Equation Modeling (SEM). The findings support that tax incentive fully mediates the relationship between ownership advantage and FDI toward hotel performance and partially mediates location advantage and internationalization on FDI investments toward hotel performance. The paper strengthens theoretical arguments by indicating the mediation effect of tax incentives on the relationship between the determinant of FDI, OWA, LA, INT, ICT, and hotel performance. Thus, this study adds to the literature as it has confirmed the eclectic paradigm theory.