The North American Industry classification system (NAICS) is a new categorization system for various industries, replacing the old US Standard Industrial Classification system (SIC) developed by the office of management and Budget (OBM). Unlike the output-based framework of the SIC system, NAIC adopts a production-oriented or supply-based conceptual framework. The Industrial Classification System aims to classify companies and industries based on shared characteristics in order to organize specific statistical data such as import/export information, employment numbers, tax revenues, and wage details (William and Weinstein, 2004).
The OMB has the ability to classify or code businesses and establishments into industries. This classification and coding work is also done by NAICS, all
...owing for the comparison of industry statistics across international, state, and local economies. Unlike the US standard industrial classification system, the SIC does not allow for a direct comparison between countries.
The OBM made the decision to replace the previous classification system with NAICS due to its emphasis on new and emerging industries, particularly those that are highly technological and have similar production processes. NAICS utilizes a six-digit code for classification purposes. The first two digits indicate the general sector, while the following three digits offer more specific information about the sector's operations. Within each sector, there are multiple groups distinguished by five and six-digit codes that specify particular types of production (Leo, 2005).
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