Tradeoffs to Using Standardized Tools : An Innovation Enabler or Creativity Constraint?

The creation of new products or innovations is often based on enabling technologies such as standardized development tools. Firms often have a choice whether to use these tools, or to create the functionality themselves. In this paper, we study how the use of standardized tools is related to the novelty and value of products being created. We argue that the use of these tools is associated with products which are less novel, but more valuable on average. We test these predictions using data on the use of middleware (e.g. game engines) in the console video-game market and find support for our hypotheses. We exploit a policy change that affect the ability of US based developers to hire workers as an instrument for the use of development tools and find further support for these patterns