This thesis aims to address a major research gap in contemporary innovation and competition research by exploring the nature of innovation and competition in the videogame development (VGD) industry, which is considered a significant part of the creative service industries in the contemporary "experience economy". Based on an in-depth, chronological and multiple-case study, this thesis finds that the industry has experienced a radical "paradigm-shift" - transforming itself from producing simple products into supplying complex product systems (CoPS). This radical transformation consists of numerous incremental innovations across the whole industry over time. Despite finding that the precise nature of VGD innovation varies from case to case and firm to firm with a high degree of idiosyncrasy, this thesis demonstrates the significance and function of content innovation in the VGD innovation and competition process. This thesis also finds that, before the rise of the online format, videogame can be characterised as craft-like/simple product but then videogame should be characterised as craft-like/complex service system. However, in terms of the production method, the VGD industry follows the managerial pattern of traditional manufacturing industries as a great deal of formalisation and modularisation takes place within these multiple-CoPS project-based firms. In terms of competitive strategy, this thesis finds that the process and content of strategic management in the VGO industry do not resemble those described in either the rationalist approach or the Competitive Forces approach. In other words, the conventional wisdom of innovation and strategic management research can not offer a satisfactory account of all these aforementioned changes; and only a multifaceted innovation perspective and the dynamic capabilities approach (DCA) can truly capture the phenomenon taking place over the last few years. However, the DCA still needs further elaboration to be non-tautological.