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A General Inter-Industry Relatedness Index

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  • David Bryce
  • Sidney Winter

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.

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File URL: ftp://ftp2.census.gov/ces/wp/2006/CES-WP-06-31.pdf
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 06-31.

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Length: 39 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:cen:wpaper:06-31

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Citations

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Cited by:
  1. Alessia LO TURCO & Daniela MAGGIONI, 2014. "On firms' product space evolution: the role of firm and local product relatedness," Working Papers, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali 402, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  2. Nikulainen, Tuomo & Pajarinen, Mika, 2013. "Industry restructuring in the ICT sector – What does labor mobility tell us about skill relatedness and knowledge spillovers?," ETLA Working Papers, The Research Institute of the Finnish Economy 17, The Research Institute of the Finnish Economy.
  3. Peng, Mike W. & Lee, Seung-Hyun & Hong, Sungjin J., 2014. "Entrepreneurs as intermediaries," Journal of World Business, Elsevier, Elsevier, vol. 49(1), pages 21-31.
  4. Frank Neffke & Martin Svensson Henning, 2009. "Skill-relatedness and firm diversification," Papers on Economics and Evolution 2009-06, Philipps University Marburg, Department of Geography, revised Oct 2010.
  5. Giulio Cainelli & Donato Iacobucci, 2012. "Agglomeration, Related Variety, and Vertical Integration," Economic Geography, Clark University, vol. 88(3), pages 255-277, 07.
  6. Bustos, Sebastián & Gomez, Charles & Hausmann, Ricardo & Hidalgo, César A., 2012. "The Dynamics of Nestedness Predicts the Evolution of Industrial Ecosystems," Scholarly Articles 8832358, Harvard Kennedy School of Government.
  7. Qian Cher Li & Andrea Mina & Bruce S. Tether & Karl Wennberg, 2011. "Diversification and Human Capital as Antecedents of Internationalization amongst Professional Service Firms: A Study of UK Based Engineering Consultants," DRUID Working Papers, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies 11-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  8. Frank Neffke & Martin Henning, 2011. "Entrepreneurship Diversification, Skill Relatedness and Regional Economic Evolution," ERSA conference papers ersa10p937, European Regional Science Association.
  9. Francisco Rebelo & Ester Gomes da Silva, 2013. "Export variety, technological content and economic performance: The case of Portugal," Papers in Evolutionary Economic Geography (PEEG), Utrecht University, Section of Economic Geography 1310, Utrecht University, Section of Economic Geography, revised Jun 2013.
  10. Huo, Dong & Motohashi, Kazuyuki, 2013. "When Category-based Indices Encounter Non-independent Categories: Solving the Taxonomy Issue in Resource-based Empirical Studies," MPRA Paper 56186, University Library of Munich, Germany.

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