Exploiting Expert Knowledge for Assigning Firms to Industries: A Novel Deep Learning Method
This addresses a fundamental task in business and economic analysis, but it is incremental as it builds on prior methods by incorporating overlooked knowledge types.
The paper tackles the problem of assigning firms to industries by proposing a novel deep learning method that integrates three types of expert knowledge and accounts for time-specificity, achieving improved accuracy over existing methods.
Industry assignment, which assigns firms to industries according to a predefined Industry Classification System (ICS), is fundamental to a large number of critical business practices, ranging from operations and strategic decision making by firms to economic analyses by government agencies. Three types of expert knowledge are essential to effective industry assignment: definition-based knowledge (i.e., expert definitions of each industry), structure-based knowledge (i.e., structural relationships among industries as specified in an ICS), and assignment-based knowledge (i.e., prior firm-industry assignments performed by domain experts). Existing industry assignment methods utilize only assignment-based knowledge to learn a model that classifies unassigned firms to industries, and overlook definition-based and structure-based knowledge. Moreover, these methods only consider which industry a firm has been assigned to, but ignore the time-specificity of assignment-based knowledge, i.e., when the assignment occurs. To address the limitations of existing methods, we propose a novel deep learning-based method that not only seamlessly integrates the three types of knowledge for industry assignment but also takes the time-specificity of assignment-based knowledge into account. Methodologically, our method features two innovations: dynamic industry representation and hierarchical assignment. The former represents an industry as a sequence of time-specific vectors by integrating the three types of knowledge through our proposed temporal and spatial aggregation mechanisms. The latter takes industry and firm representations as inputs, computes the probability of assigning a firm to different industries, and assigns the firm to the industry with the highest probability.