It really just boils down to lack of competition. The moment another studio can crank out a proper HOI4 or Vicky 2 competitor Paradox effectively goes tits up overnight. They've never been challenged in this space so the current company culture has internalized coasting from failure to failure without consequence.
The reality is they do have competitors and have had them since the early/mid 2010s, the issue is the audience is now so soy-slopped that the audience has effectively changed, much like Total War.
Both series were started to be effective simulations of politics/warfare in certain time periods, but it's now about completely asinine viral-chasing egg heads making stupid shit. The audience has been hollowed out and replaced. It's not about people who enjoy deep computer simulations, it's about people who want to click a button and gain validation that they'd be the perfect benevolent dictator.
Case in point, Hearts of Iron used to be about using generic IC to build generic divisions with generic research because it understood a modern total war is not defined by whether you have 1940 model aircraft, but how much you have, and that you don't need to simulate division and organisational structures beyond a certain level in a strategic sense. Hearts of Iron 3 certainly flipped this a bit because the scale was increased significantly, but you were still building units with generic types that could be boiled down to HP, soft attack, hard attack, armor. IC remained. You focused on actually fighting.
Now, Hearts of Iron 4 you are spending 35% of the game on a completely different screen trying to parse the difference between 15 lines of +5% buffs to artillery cost productivity, 50% of the game fiddling with how many factories are producing rifles and what kind of radios your fighters have, and 15% of the time watching the computer move, fight, and die for you.
If you want Paradox competitors, you'll find plenty at Matrix and Slitherine Games, they just have different audiences, the same audience that liked OG Paradox, which is why they don't get mass popularity - Paradox never had mass popularity until EU4, solidified by HoI4.
