The Impact of Decomposability on Organizational Hierarchy: Evidence from the Game Engine and Video Game Industry 1990-2019
Abstract
We observe a growing number of software development kits (SDKs) are externally available. We explore how using externally available SDKs affects the product innovation process. We characterize (1) product development by using externally available SDKs as solving nearly modular problems and (2) product development by building inhouse SDKs as solving an integral problem (i.e., relatively non-modular). We explore the video game industry, in which software development kits are called game engines, and game developers explore theme innovations (i.e., non-technological dimension) as well as technological innovations. Findings suggest that on average, using commercial game engines facilitates module-level innovations but less likely to introduce system-level innovations which require a cross-module coordination. Also, the number of commercial game engine users is an important predictor of product innovation. If when the number of users is not sufficiently large, its weakness in system-level innovations exacerbated, and the strength in module innovation is also weaker, showing that harnessing the power of positive feedback (i.e., ecosystem effect) between the number of users and the quality of engines matters.
Keywords: Decomposability, Organizational Hierarchy, Software Development Kits, Product Innovation
Sungyong Chang 