Levels without Bosses? Entrepreneurship and Valve’s Organizational Design

Abstract

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. In this chapter, we 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. In particular, we use our survey of Valve’s unique organization to draw implications for theories of entrepreneurship, projects, strategy formation, and organizational capabilities. To do this, we draw on a range of publicly available data and first-hand accounts of the company, as well as available secondary literature. We also use the case of Half-Life 3, a highly-demanded-yet-never-made game, and Half-Life: Alyx, as examples of challenges organizations such as Valve face.

Keywords: Entrepreneurship, theory of the firm, judgment, Organizational design, Valve,

JEL Classification: D23, D81, L20, L23, L26, L29,