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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 31, No. 4, pp.377-399
ISSN: 1225-0279 (Print)
Print publication date 30 Nov 2018
Received 18 Apr 2018 Revised 30 Aug 2018 Accepted 27 Sep 2018

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

Shin-Haing Kim ; Taegi Kim
Shin-Haing Kim, Professor Emeritus, Department of Economics, Seoul National University, Seoul, South Korea shk@snu.ac.kr
Taegi Kim, Corresponding Author, Professor, Department of Economics, Chonnam National University, Gwangju, South Korea, Tel: +82-62-530-1455 tgkim@jnu.ac.kr

JEL Classification: E22, O47

Abstract

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.

Keywords:

Tobin’s q, Multi-product firm, Catch up, Fixed capital good, Endogenous growth, Korean chaebol, Gibrat’s law

Acknowledgments

The valuable comments of two anonymous referees contributed to improve the original version of this paper.

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