In 2007, the studio debuted a new game engine, called Clausewitz Engine in Europa Universalis III. The move led to the development of games such as For the Glory, Arsenal of Democracy, Darkest Hour, and Iron Cross. In April 2008, Paradox allowed certain indie game developers to freely use the (by then) superseded engine as part of their Europa Engine Licensing Program. Although this code overlap was subsequently referred to as the Europa Engine, studio manager Johan Andersson clarified that the 'engine' had not been part of the initial designs of each of the company's first six games, and that it just resulted from copy-pasting large parts of code from one game to the next. Paradox developed its debut game Europa Universalis in 2000, and used large chunks of its code for its next games. As a result, games can be modded with as little as a text editor, which has led to the development of strong modding communities for each of Paradox’s games. Both were also designed to be open to anyone who wishes to modify the original game files to create mods. To date, Paradox have engineered two main proprietary game engines for their titles, Europa and Clausewitz. While this left Imperator: Rome without a dedicated development team, PDS leads stated that they are figuring out how they will return to the series in time. Europa Universalis would be handled by Paradox Tinto, a new studio in Barcelona.
PDS Green would handle the Stellaris franchise with support of Paradox Arctic, PDS Red on Crusader Kings and Victoria, and PDS Gold on Hearts of Iron. In 2021, PDS reorganized into three main segments, each working on key franchises. Grand strategy games are historical strategy games that usually cover the entire world map and include elements such as economy, diplomacy and warfare. The game development studio was one of the first video game developers to create games in the grand strategy genre, and most of the games the studio has developed fall into that category. Paradox Interactive became the game publisher focused on PC games of various genres and Paradox Development Studio became the game development studio focused on grand strategy games. In January 2012, the company divided yet again into two studios, becoming Paradox Interactive and Paradox Development Studio. The company continued to create PC games and in 1999, the company was divided into two separate entities: Paradox Interactive, which focused on creating grand strategy games for PC, and Paradox Entertainment, which focused on creating board and role-playing games. Paradox Development Studio (PDS) is based on the heritage of the Swedish board game company Target Games, and has been a game developer of PC-focused grand strategy games since 1995, including the Europa Universalis, Hearts of Iron, Victoria, Crusader Kings, and Imperator series.
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