A Robust Economic, as Opposed to Industry Classification Nomenclature for Identification and Study of Corporate Diversification

It is well established that Tobin's q is more a measure of average productivity than marginal productivity. This study arrives at two conditions that, satisfied, transform Tobin's q into a robust qualitative - well ordered - measure for firms' marginal productivity. First, in presence of continuity of efficiency of internal capital markets, model predictions show absence of a diversification discount feasibly tatonnes into emergence of a diversification discount. Efficiency of internal capital markets then is shown to be robustly deducible from performance effects of arrival of a beneficial shock in opportunity set of a division of a diversified firm that is characterized by `soft' information. Second, the formal theory establishes necessity of a new economic nomenclature for identification of diversified firms. In presence of the new economic nomenclature, a firm operating in two different industry segments has, conditional on asymptotic equality of segment marginal productivities, classification as a focused firm.