There’s a tendency, even among seasoned economists, to treat ISIC codes as though they exist in a vacuum—neatly separating sectors, sorting economic activity into convenient boxes. But in reality, the landscape of industry is far more layered. Businesses come in all shapes and sizes, wrapped in a range of legal structures that, if we’re honest, are sometimes opaque even to insiders. Pairing ISIC classifications with legal entity types and ownership structures opens an unexpectedly rich seam of insight. For policymakers and researchers, it’s a perspective that’s overdue for more serious attention.
Legal entities—sole proprietorships, partnerships, limited liability companies (LLCs), joint-stock companies, cooperatives—these aren’t just formalities. They are, in many cases, adaptive responses to regulation, capital requirements, and market forces. Where you see a clustering of microenterprises under a particular ISIC code, it’s worth pausing to ask why. Sometimes, it’s just the nature of the activity—think corner shops, hair salons, or small-scale farmers. But just as often, high microenterprise density flags underlying constraints: barriers to credit, burdensome registration, or regulatory thresholds that nudge entrepreneurs to stay small and informal.
Consider, for example, food retailing. In many developing countries, ISIC code 4711 (Retail sale in non-specialized stores with food, beverages, or tobacco predominating) is dominated by tiny sole proprietorships and family businesses. At first glance, this may suggest a vibrant entrepreneurial culture. But a closer look, correlating entity data, often reveals another story: entrepreneurs stuck at the micro level because formalizing into an LLC or joint-stock company would trigger expensive compliance, new tax liabilities, or complex licensing. The high rate of informality is, in this case, a signal. It’s not just a preference—it’s a reaction to policy design.
Conversely, some ISIC codes almost always correlate with larger, more capitalized legal forms. Heavy manufacturing, utilities, and finance are clear examples. You rarely see a sole trader operating a chemical plant or a private individual running a commercial bank. Here, the prevalence of joint-stock companies, public corporations, or consortiums reflects more than just ambition. These sectors are capital-intensive, require risk-sharing, and often face regulatory mandates about minimum capitalization and governance. It’s a world apart from the bazaar-like informality of food retail or local services.
But let’s not get too neat about this. There’s always nuance—sometimes contradiction. In certain jurisdictions, legacy rules or sudden regulatory reforms create odd outcomes. For instance, rapid privatization can result in dozens of tiny shareholding companies springing up in sectors previously run by the state. Over time, market pressures may drive consolidation, but the interim landscape is chaotic: a patchwork of small, technically “corporate” entities that bear little resemblance to their multinational cousins. The ISIC code alone doesn’t tell you this story, but overlaying it with legal entity data begins to reveal the broader dynamics.
Ownership structure is just as revealing. Consider sectors where foreign direct investment is prevalent. Here, the legal entity chosen often reflects both local law and the priorities of international investors—be it joint ventures, wholly-owned subsidiaries, or strategic alliances. In some countries, certain ISIC codes are disproportionately populated by foreign-owned entities, especially in export-oriented manufacturing or extractive industries. This, in turn, shapes everything from wage levels to local supplier development. Policymakers, if they want to encourage greater domestic participation, need to see these patterns. A simple tally of businesses by ISIC code misses the point; the legal wrapper and the ownership structure matter.
There’s another layer, perhaps less talked about: cooperatives and social enterprises. These forms tend to cluster in sectors like agriculture (ISIC code 011), education (code 852), and health (code 861). In regions with strong cooperative traditions, entire industries may operate on a mutual basis, with distributed ownership and democratic governance. The policy implications here are subtle but significant. Incentives that suit joint-stock companies may be ill-suited for cooperatives. Likewise, efforts to attract venture capital into these sectors can clash with their non-profit ethos or collective ownership rules.
For researchers, examining the intersection of ISIC codes and entity types opens up practical avenues for reform. If a sector is dominated by microenterprises, is it because of genuine entrepreneurial preference, or is the regulatory environment locking businesses in at the bottom? If large corporations crowd out small players in another sector, is it due to natural economies of scale, or are there policy-induced barriers to entry that deserve a second look? Data alone can’t answer these questions, but correlating codes and entity types provides valuable signals.
In some countries, policymakers have acted on these insights. Consider the reforms to company law in Kenya in the 2010s. By streamlining registration and reducing minimum capital requirements, the government made it easier for micro and small enterprises—previously clustered in just a few ISIC codes under informal status—to formalize as LLCs or partnerships. The result wasn’t just a bump in the number of formal businesses. It also led to greater diversity in ownership structures across the economy, with spillover benefits in productivity and access to finance.
There are also, admittedly, risks. Too aggressive an approach to formalization can destroy informal jobs faster than new formal ones are created. The structure of the economy—reflected in ISIC code distributions—needs to be respected, even as it is gently steered. Nuance is required.
As someone who has waded through countless business registers and corporate filings, I’m continually struck by how much gets lost when we focus only on high-level numbers. The real levers for policy change are often hidden in these cross-cutting patterns. Correlate ISIC codes to legal forms and ownership, and you see not just what the economy is, but what it could become—with the right policy nudge, or sometimes with a lighter regulatory touch.
A small shift in perspective can, if we’re attentive, lead to much bigger changes on the ground.