Creating Industry Classifications by Statistical Cluster Analysis

Much emphasis on the sectoral perspective in economics originates in the observation of the diverse and contingent nature of competitive behaviour, where a firm's performance depends on the capability to match its organisation and strategy to the technological, social and economic restrictions imposed by the business environment. For this reason, analytically based industry classifications are frequently applied in empirical studies on competitive performance, technological development, international trade, and industrial economics. This paper shows how the use of statistical cluster analysis and the generation of empirically based sectoral classifications can provide new and valuable tools for research into the sectoral contingency of industrial development.