When diversification backfires: evidence from game developers in the Steam
DOI:
https://doi.org/10.3846/bm.2026.2254Abstract
To remain competitive, game developers are progressively diversifying their games across several genres. However, diversification may also introduce coordination complexity and managerial attention constraints thereby undermining performance. We investigate the performance implications of genre diversification across developer categories in the gaming industry. Using firm-level data from 259 Steam game developers, we build a variety of linear, quadratic, and moderated regression models. Genre diversification is measured using a Genre Diversification Index based on the Herfindahl–Hirschman Index, while firm performance is captured through revenue-based indicators, controlling for portfolio size and developer class. We find that genre diversification is consistently and negatively associated with firm performance across all model specifications. We find no evidence of a curvilinear (inverted U-shaped) relationship, nor of moderation by developer classification, indicating that diversification does not enhance performance even for more resource-endowed developers. In contrast, portfolio size exhibits a robust positive effect on performance. These results suggest that in the game industry, diversification functions less as a growth-enhancing strategy and more as a source of organizational complexity and attention fragmentation. Overall, the findings highlight the primacy of resource depth and focused managerial attention over portfolio breadth in creative digital industries.
Keywords:
game industry, diversification, game genre, portfolio size, resource-based view, attention-based viewHow to Cite
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