Heterogeneity of Capital: Concluding Remarks

This chapter summarizes the research results obtained by the studies discussed in this book by applying the Multiple q model of capital investment. We conclude that the characteristics and features of capital stocks are considerably different enough that we can affirm that they are heterogeneous with respect to either their physical attributes or the qualitative classifications to which they belong. In modeling a firm’s investment behavior reflecting the costs and benefits of adjusting each heterogeneous capital stock, we emphasize that costs do not necessarily exhibit the linearity and convexity on which the standard neoclassical investment theory is based, and from these deviations, the irreversibility and lumpiness of investments may emerge. We also point out that investment behavior is constrained by capital market imperfections, implying that scrutinizing the Multiple q model is not sufficient to eliminate the discrepancy between the theory and empirical performance of Tobin’s q models.