Establishment as Statistical Unit

NAICS classifies establishments, not enterprises. An establishment is defined as the smallest operating entity for which records provide information on the cost of resources, materials, labor, and capital, employed to produce output.

This is typically a single physical location, though administratively distinct operations at one location may be treated separately. A company with multiple facilities gets multiple classifications, one per establishment, based on that location’s primary activity.

The choice of unit shapes everything downstream. Classifying enterprises (whole companies) would group diverse activities under a single code. Classifying establishments keeps the data granular but loses the corporate relationship.

There’s no neutral choice here. The unit of analysis determines what questions can be answered cleanly versus what requires estimation and imputation. NAICS chose establishments because production analysis requires knowing what happens at specific sites, not just what companies do in aggregate.

Related: [None yet]