A General Inter-Industry Relatedness Index

David Bryce and Sidney Winter (winter@wharton.upenn.edu)

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Firm growth and expansion is widely believed to be guided by the desire to leverage existing resources. But which resources? The answer depends largely on context.the peculiarities of industries, firms, technologies, production, customers, and a host of other dimensions. This fact makes pointing to any particular set of resources as the source of expansion decisions potentially problematic and makes more difficult tests of theories such as the resource-based view of the firm. This paper tackles the problem by developing a general inter-industry relatedness index that can be usefully applied across industry and firm contexts. The index harnesses the relatedness information embedded in the multi-product organization and diversification decisions of every firm in the US manufacturing economy. The index is general in that it implicitly varies the underlying resources upon which expansion proceeds with the industries in question and provides a percentile relatedness rank for every possible pair of fourdigit SIC manufacturing industries. The general index is tested for predictive validity and found to perform as expected. Applications of the index in strategy research are suggested.

Pages: 39 pages
Date: 2006-12
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ino and nep-tid
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Citations: View citations in EconPapers (2)

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https://www2.census.gov/ces/wp/2006/CES-WP-06-31.pdf First version, 2006 (application/pdf)

Related works:
Journal Article: A General Interindustry Relatedness Index (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:06-31

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