On the Determinants of Tobin's Q for Taiwanese Firms: Industry Concentration, Innovation Activities and Life-Cycle Stage

Our study tests the role that industry concentration (IC), corporate innovation activities (as measured by a firm's research and development expense (RD)), and life-cycle stage play in determining the Tobin's Q ratios of Taiwanese firms. We find that all three variables play a key role. To further investigate the relation between IC and RD, we conducted a generalized method of momentum (GMM) and a Granger non-causality test. Both tests indicate a unidirectional effect from RD to IC. We conclude that a firm's industry structure, innovation activities, and life cycle stage are important factors when developing corporate strategy, making investment decisions, or setting government policy.