Abstract

Several Criteria can be used to classify business firms in the economy. Business firms, for example, could be classified into large, medium or small on the basis of a single criterion such as the sales or number of Workers criterion. Such criteria are usually chosen on a random basis. No scientific reasoning is given for such choice of classification. Accordingly, the purpose of this study is to utilize statistical techniques, such as discriminant analysis, and cluster analysis, in deciding the most appropriate classification for business firms in Jordan (as a case study). Such techniques are usually based on several important variables (criteria) that interact simultaneously to determine the appropriate classification. The study shows the invalidity of using a single criterion in classifying business firms. Such invalidity, is due to scientific problems and the inconsistency of government decision applied to those businesses. In addition, and using what is called statistical distance, five groups (clusters) of business firms were identified, each group holds several important characteristics that distinguish it from other groups.