Abstract: The DeepSeek-R1 big model of DeepSeek corporation has drawn global attention with its low-cost, high-performance, and open-source model. However, while existing research has extensively discussed its innovative impact, it has not revealed the underlying innovation mechanism. This paper adopts a longitudinal single-case study approach. Based on a systematic and detailed description of its innovation process, "business model", strategic management, and organizational structure, it reveals a special innovation mechanism. The research finds that the founders and team of DeepSeek corporation not only demonstrate a dual entrepreneurial spirit of arbitrage and innovation, but also have an innovation consciousness of technological self-reliance and self-strengthening. These two factors jointly lead to outstanding achievements in independent and integrated innovation. Originating from the AI team of its parent company, Phantoms Quant, and being a typical application scenario of quantitative trading, data science, artificial intelligence, and large models, DeepSeek has formed a de facto strong demand-driven "business model" at the beginning of its entrepreneurship. During the development process of the DeepSeek-R1 model, the multiple reuse and optimization of single modules have given rise to internal economies of scale, and the interaction among multiple modules has further achieved an internal "flywheel effect". Meanwhile, its open-source model and application diffusion have formed external economies of scale and, in turn, have complemented its own innovation. This study fills the existing research gap and provides a realistic explanation and theoretical basis for subsequent theoretical research and industrial policies and governance.