Tobins q of a Multi-Product Firm and an Endogenous Growth of a Firm

Abstract

This study considers the Tobins q of a multi-product firm with fixed capital goods. This modified version of Tobins q includes a share of the fixed capital goods in a firms investment. A firm in a developing economy, such as a South Korean chaebol, catches up the world frontier technology with its diverse products. The fixed capital investments of chaebols are conducive in pursuing diversifications, thereby exhibiting high Tobins q. Moreover, achieving an Ak technology enables chaebols to reap their growth on the endogenous path. We observe a high disparity between the chaebol-incumbent and non-incumbent firms in their growth performances in the previous half-century experience of the South Korean economy. We attribute this disparity to the endogenous growth of chaebols.