Tobin’s q of a Multi-Product Firm and an Endogenous Growth of a Firm

This study considers the Tobin’s q of a ‘multi-product’ firm with fixed capital goods. This modified version of Tobin’s q includes a share of the fixed capital goods in a firm’s 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 Tobin’s 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.