Value Chain Structure and Correlation between Design Structure Matrices

An empirical study of the relationship between product architecture and industry structure is discussed. Product architecture is modeled by using Design Structure Matrices (DSMs) representing three different types of intercomponent relationships: technological homogeneity, functional interaction and assembly process contiguity. The DSM models may be used to explain firms' specialization choices within an industry. Moreover, the same models can provide a rough-cut forecast of the impact that modular and architectural innovation may have on industry structure. The method is then applied to the automotive industry, using empirical data on automotive suppliers located in the province of Turin, in Northwestern Italy.