The video game industry has often been surrounded by controversy and, in fact, has been a repeated target of public outcry over the past forty years or so. Until recently, however, it was typically the content of games that invited criticism, most infamously in the debate about the effects of video game violence on children (Egenfeldt-Nielsen, Smith, and Tosca, 2020, pp. 273–297). Yet in the last decade, the controversy has shifted to the business of video games and to questions about the economics and ethics of game production and distribution (for example, McCaffrey, 2019). As a result, academic researchers in the social sciences and humanities are increasingly turning their attention toward the major development and publishing companies and the ways that their organizations evolve in response to far-reaching social, economic, and technological changes (O’Donnell, 2017).
One of the key players in the industry is Valve Corporation, an enigmatic and idiosyncratic company that offers a fascinating example of nontraditional economic organization. Valve is a “flat” company without a management hierarchy or traditional boss roles: instead of top-down organization and management, Valve employees are free to work on whatever projects they choose and to convince other employees to join collaborative groups. Decision-making is thus “democratized” rather than centralized in key management positions. This peculiar structure, or lack thereof, seems to challenge conventional ideas about organization not only in the video game business but also business in general. We say “seems to” because, as we will explain, the company's story is more complicated than either its supporters or critics tend to acknowledge.
Despite Valve's distinctive and even extreme approach to organizing, research on the company is limited to only a few papers (for example, Felin and Powell, 2016; Puranam and Håkonsson, 2015) that paint a somewhat scattered and incomplete picture of its operations. In this chapter, we will integrate and expand on this work to explore Valve's economic organization and discuss the challenges it faces. We thereby provide a clearer and more comprehensive story of this organization, while also providing a foundation for future research on the gaming industry as well as on economic organization more generally. Companies such as Valve challenge our “pet theories” in strategy and management (Birkinshaw, 2015), and, by doing so, they provide valuable opportunities to discuss their limitations and oversights.