The transformation of R&D into neo open innovation- a new concept in R&D endeavor triggered by amazon

an of R&D as a system, to a convincing to this It has been identified that Amazon, which is based on R&D as a culture, has been companywide experimentation to cause customers obsessed with making purchase decisions. This obsession has enabled Amazon to deploy an architecture for participation that makes the most of digital technologies by harnessing the power of users. Such user-driven innovation has accelerated a dramatic advancement of the Internet that, in turn, has accelerated the co-emergence of soft innovation resources in the marketplace. This emergence has activated a self-propagating function that has induced functionality development, leading to supra-functionality beyond an economic value that satisfies a shift in customers’ preferences. While this system depends on the assimilation capacity of soft innovation resources, Amazon has developed a high level of capacity supported by a rapid and notable increase in R&D investment. The above efforts function in a virtuous cycle leading to the transformation of “routine or periodic alterations” into “significant improvement.” These findings give rise to insightful suggestions regarding a new concept of R&D in neo open innovation in the digital economy.


Introduction
There is a crucial dilemma when opting for R&D expansion as it can lead to productivity decline, caused by the two-faced nature of information and communication technology (ICT) centered on the advancement of the Internet. This has become a serious problem for ICT firms [1,2]. Despite this, global ICT leaders have exhibited a remarkable growth in R&D. Fig. 1 illustrates the world's top 25 R&D leaders by their R&D expenditure in 2017, which demonstrates a notable R&D growth rate in software and Internet leaders in 2017 as 40.4% (Amazon), 12.7% (Alphabet), 8.8% (Microsoft), 28.5% (Huawei) and 24.5% (Apple) while the growth rate in computer & electronics has been much lower, at −3.2% (Samsung) and 5.0% (Intel). Noteworthy is Amazon's conspicuous jump. It invested US$ 22.6 billion R&D in 2017 and jumped up to the ranks of the world's top R&D firm, surpassing rival global ICT leaders. It is only in the last few years that Amazon's spending has ranked among that of the potential global leaders in R&D.
The rapid increase in R&D spending showed no signs of slowing down the pace in 2018. The amount spent by Amazon on R&D in 2018 is poised to surpass the GDP of Iceland, as demonstrated in Fig. 2 [5].
In corresponding to such a rapid and notable increase in R&D investment, Amazon has accomplished a skyrocketing increase in its market capitalization (MC), as demonstrated in Recalling Amazon's conspicuous, rapid and notable increase in R&D investment, as reviewed in Fig. 1, it is naturally assumed that its skyrocketing increase in market capitalization can be attributed to its R&D investment.
However, Amazon's rapid and notable increase in R&D investment has raised two questions.
First, the definition of R&D in the digital economy. The authors have pointed out the structural change of the concept of output in the digital economy and revealed the limitation of GDP in measuring the output of the digital economy [9,10] by demonstrating the increasing dependence on uncaptured GDP [11][12][13]. Amazon's rapid and notable increase in its R&D investment amid the digital economy prompts the possibility of a structural change in the concept of R&D, similar to the output. Amazon insists on describing "technology and content," not "R &D" as its "R&D investment" in its annual reports 1 . This implies profound insights into the R&D model in the digital economy.
Second, there is the question of a disruptive business model that provides a reasonable solution to the dilemma between R&D expansion and productivity decline. Notwithstanding the fear of such a dilemma,

Fig. 3. Trend in Amazon's market capitalization
Y. Tou, et al. Technology in Society 58 (2019) 101141 Amazon has been accomplishing notable performance [14] by fully utilizing such a rapidly increasing R&D. Amazon has invested considerable resources into extremely innovative business areas, such as Amazon Web Services (AWS), Kindle, Alexa (Amazon Echo) and Amazon Go, which accelerate the exploration of the Amazon empire chain and big data collection system. In parallel with such innovation challenges at the forefront, it endeavors to absorb soft innovation resources (SIRs) 2 , such as sleeping and untapped resources [15], from external markets and assimilate them into its business model. This transforms "routine or periodic alterations" (classified as non-R&D in the traditional accounting standard) into "significant improvement" (similarly classified as R&D), leading to the company becoming the world's top R&D firm.
The advancement of the Amazon empire chain and subsequent big data collection system contributes to the absorption of broad soft innovation resources. Rapid and notable R&D investment contributes to enhancing assimilation capacity.
Since these endeavors can be expected to trigger the new concept of R&D in neo open innovation, an empirical analysis of Amazon's initiative may lead the way in revealing the significance of transformation of the R&D concept in the digital economy.
In light of Amazon's notable business performance based on its unique business model, to date, a significant number of studies have attempted to analyze its notable performance and unique business model (e.g., [14,16,17]. In addition, given such a rapid and notable R& D increase leading Amazon to become the world's top R&D firm in 2017 over such a short period of time, as reviewed above, a number of questions were raised about its R&D model, such as, is it really R&D or merely routine or periodic alterations (e.g., [4,18]? However, inside the black box of its unique model, much has remained unveiled. This can largely be attributed to Amazon's secretiveness, which is part of its CEO Jeff Bezos's policy [19]. As a matter of fact, he has himself confessed that "I have to be very choosy" [20].
Under such constraints, analyses of Amazon's unique R&D model from the viewpoint of providing a solution to the dilemma between R& D expansion and productivity decline that the majority of global ICT firms have been confronting in the digital economy [1,2] are limited.
Some exceptions can be seen in the analyses from the viewpoints of co-emergence of innovation with its counterparts [21] demonstrated the significant effects of the collaboration with its competitors, known as coopetition. They demonstrated that, by collaborating with its competitors, Amazon has succeeded in building new capabilities, gaining better leverages and boosting its brand and technologies [22] also identified that, by making itself indispensable to e-commerce, Amazon has enjoyed receiving business from its rivals. [23]; based on O'Reilly's postulation of the "architecture of participation" [24], demonstrated that Amazon has succeeded in deploying this architecture and has been making most of the digital technologies by harnessing the power of its users.
The authors, in their preceding studies, demonstrated the significance of the coopetition strategy in the conspicuous performance accomplished by Canon (Japan's leading multinational corporation specializing in the manufacturing of optical products, similar to Amazon) [25,26]. Also, based on this finding, they postulated the significance of neo open innovation in the digital economy as a promising solution to such a dilemma [1,2]. Examination of this postulation, by analyzing Amazon's R&D model as a system, is expected to shed light on the transformative direction towards a new concept of R&D in the digital economy.
Utilizing a techno-metrics approach, together with intensive literature reviews, this paper attempts to elucidate this dynamism. An empirical analysis was conducted, focusing on Amazon's R&D performance by absorbing external innovation resources, particularly soft innovation resources, and assimilating them into its business.
Based on R&D as a culture of the company, Amazon has been encouraging companywide experimentation to make customers obsessed with making purchase decisions. This endeavor has enabled Amazon to deploy architecture for participation, which has made the most of digital technologies by harnessing the power of its users. Such userdriven innovation accelerated the dramatic advancement of the Internet, which, in turn, accelerated co-emergence, awakening, and the inducement of soft innovation resources in the marketplace. Emerged soft innovation resources activated a self-propagating function, which induced functionality development, leading to supra-functionality beyond an economic value that satisfies a shift in customers' preferences.
While this system depends on the assimilation capacity of soft innovation resources, Amazon has developed this capacity to a high level, supported by a rapid and notable increase in R&D investment. The above efforts functioned as a virtuous cycle, leading to transforming "routine or periodic alterations" into "significant improvement" during the R&D process. These findings give rise to insightful suggestions about the new concept of R&D in neo open innovation in the digital economy.
The structure of this paper is as follows: Section 2 reviews Amazon's unique R&D model. Amazon's R&D, scope, definition, and methods of implementation are discussed in Section 3. Section 4 elucidates Amazon's R&D inducement dynamism. Section 5 summarizes the noteworthy findings, policy suggestions, and future research.

Amazon: R&D as a culture
Amazon has been endeavoring to be an R&D-driven company since its inception in 1994, as demonstrated in Table 1.
With such an R&D-driven innovation-seeking strategy, Amazon offered customers a lot more choice, speed, reliability and superior customer service, thereby proving its resilience against the bursting of the dotcom bubble in 2000 [27].
To better understand the origin of Amazon's R&D strategy, we can look at its founder and CEO Jeffery (Jeff) [28] letter to shareholders [28]. In the letter he stressed that: "All the effort we put into technology might not matter that much if we kept technology off to the side in some sort of R&D department, but we don't take that approach. Technology infuses all of our teams, all of our processes, our decision-making, and our approach to innovation in each of our businesses. It is deeply integrated into everything we do." He added, "these techniques are not idly pursued they lead directly to free cash flow." This quote explains the importance of R&D activities while at the same time highlighting aspects of Amazon's culture: innovation and growth are built into every segment of the company, not just R&D.

Fundamental business principle
This culture has led to Amazon establishing its fundamental business principle characterized by (i) Amazon doctrine, (ii) leadership principles, (iii) customer service philosophies, and (iv) experimentation.

Amazon doctrine
Amazon's business management has been conducted in a consistent and systematic way as a system for improving customer experience based on the Amazon doctrine, as was explained by Bezos in 2012 as: "Above all else, align with customers. Win when they win. Win only when they win" [29].

Leadership principles
Amazon has a unique culture of hiring and developing leaders with a focus on the following 14 leadership principles that have guided and shaped the company's decisions and its distinctive entrepreneurial culture. These Amazon leadership principles were set in stone to build a strong entrepreneurial and highly execution-based culture. Every employee is expected to adhere to these principles, and the firm tests all future hires on the same criteria (Bharti, 2015).

Customer service philosophies
As has been clearly explained in his doctrine and also stressed in the top 14 of leadership principles, Amazon is eager to receive consumer feedback, and Bezos has spread customers' focus as a mantra throughout the organization [27]. He has taken the philosophy of truly caring for the customer and ushered it into the digital era. He has built a company from the ground up purely based on the unbending, unyielding philosophy of serving the customer across all departments.
Such customer service philosophies have been realized in the top ranking of customer satisfaction, as demonstrated in Table 2.

Experimentation
Experimentation has been playing a crucial role in Amazon's business deployment. Bezos has encouraged experimentation by stressing that, "Experiments are key to innovation because they rarely turn out as you expect and you learn so much." Innovators like Bezos see the world as a laboratory [32].
At Amazon, experimentation is always occurring, initiated by employees in broad fields throughout the company, and ideas are constantly being presented to Bezos, leading to satisfying the first leadership principle: Customer obsession. Motivated employees understand that these ideas are going to be altered in many ways [33].
Bezos, in his 2013 letter to shareholders [34], stressed that: "Innovation comes from distributed decision-making. Top-down teams are effective at optimizing existing processes and enforcing the completion of work, but only decentralized, bottom-up teams can consistently generate new ideas." He realizes that, "We don't make money when we sell things. We make money when we help customers make purchase decisions" [20]. Amazon's CEO is always attempting experiments to make customers to be obsessed with making the purchase decision.

Resource allocation strategy
Most of Amazon's profits come from its high-tech division, such as its cloud computing operation and AWS. These profits have been reinvested in its business and employees, not in dividends and buybacks. Amazon has not paid a dividend since its initial public offering (IPO) in Table 1 Brief chronology of Amazon's major steps to becoming an innovation giant. 1997, nor has it done any buybacks of its shares since 2012. That strategy is reflected in spending on research and development activities, which has led to Amazon becoming the world's top R&D firm over a short period of time.

Basic model for R&D
Notwithstanding a rapid and notable increase in expenses for business activities generally described as "R&D," based on its basic principle for customer service, Amazon insists on describing them as "technology and content" in its annual report [35].
Amazon has invested considerable resources in extremely innovative business areas such as AWS, Kindle, Alexa and Amazon Go.
In parallel with such forefront innovation, Amazon is endeavoring to absorb soft innovation resources (SIRs) from external markets and assimilate them into its business model, which transforms "routine or periodic alterations" business activities into "significant improvement" ones as reviewed earlier.
This transformation depends on its high level of assimilation capacity, which can be attributed to the rapid and notable increase in its R& D investment, and also to the absorption of broad soft innovation resources based on the Amazon empire chain and big data collection system, together with the deployment of architecture for participation that harnesses the power of its users [23].

Scope
Amazon has been encompassing a broad area of activities such as research, design, development, and maintenance of both new and existing products and services in its "technology and content" business activities. It accomplishes these activities in such broad scope simultaneously with the principle that its business should not be managed by separating activities by type, as classified in the traditional accounting standard.

Costs
Costs for "technology and content" activities consist primarily of expenses for employees and infrastructure costs as follows: (i) Expenses for employees Payroll and expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of its websites, curation, and display of products and services made available on its websites.
(ii) Infrastructure costs Servers, networking equipment, and data center-related depreciation, rent, utilities, and other expenses necessary to support AWS, as well as other efforts.

Management policy
Its management has been conducted in a consistent and systematic way by improving customer experience based on the Amazon doctrine, explained by Bezos in 2012, as described earlier.
(i) Basic philosophy Manage these costs for "technology and content" activities collectively, as investments being made on behalf of its customers to improve their experiences.
(ii) Operation policy Manage the total investment in its employees and infrastructure across all its products and services, not separating activities by type as classified in the traditional accounting standard, as mentioned above.

R&D inducement dynamism
Amazon's business model and its endeavors to be at the frontier of innovation challenge, such as AWS, Kindle, Alexa and Amazon Go, have developed its growing empire, and also the subsequent big data collection system, as well as the architecture for participation. These chain, system, and the architecture have enabled Amazon to absorb external innovation resources extensively and assimilate them into its indigenous business model. This assimilation has transformed "routine or periodic alterations" activities into "significant improvement" activities, as illustrated in Fig. 5.

Description of R&D investment
Amazon has been pursuing identical innovation endeavor by insisting on describing its business activities, which are generally considered to be R&D investment, as "technology and content." Table 3 compares this concept with R&D conducted by Apple.
Similar to other ICT leaders, while Apple has been stressing the significance of continued R&D, licensing and mergers and acquisitions (M&A) for ensuring a continual and timely flow of competitive products, services and technologies to the marketplace, Amazon has been insisting on collective securement and management of costs for broad areas of employees (involved in the research and development of new and existing products and services, development, design, and maintenance of AWS, curation and display of products and services made available on AWS) and infrastructure (including servers, networking equipment, and data center-related depreciation, rent, utilities, and other expenses necessary to support AWS) for offering a wide variety of products and services to its customers.

The significance of technology and product concept -debate with the Securities and Exchange Commission
Amazon's profound implications on its unique R&D model is unveiled by a series of letters that the US Securities and Exchange Commission (SEC) sent to Amazon executives during the fall and winter of 2017-18 and released to the public in April 2018, the SEC urged Amazon to disclose its R&D spending as other companies do [15] 3 . (27 Sep. 2017) Tell us and disclose in future filings the total amount of research and development costs charged to expense for each year presented in the consolidated statements of operations as required by ASC (Accounting Standards Codification). (26 Oct. 2017) Our business model encourages simultaneous research, design, development, and maintenance of both new and existing products and services. For example, our teams are constantly working to build new Alexa skills and simultaneously maintain current skills, and these activities are within a continuum of those described in ASC 730-10-55-1 and 2 (see below) and are not easily distinguishable operationally. (24 Nov. 2017) Disclose the total amount of research and development costs charged to expense for each year presented in the consolidated statements of operations as required by ASC 730-10-55-1. (21 Dec. 2017) Because of our relentless focus on innovation and customer obsession, we do not manage our business by separating activities of the type that under ASC 730-10-55-1 are "typically … considered" research and  Table 3 Comparison of R&D investment description between amazon and apple (2017).

Category Description
Amazon Technology and content Technology and content costs include payroll and related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our websites, curation and display of products and services made available on our websites, and infrastructure costs. Infrastructure costs include servers, networking equipment, and data center related depreciation, rent, utilities, and other expenses necessary to support AWS, as well as these and other efforts. Collectively, these costs reflect the investments we make to offer a wide variety of products and services to our customers. Apple Research and development Because the industries in which the Company competes are characterized by rapid technological advances, the Company's ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace. The Company continues to develop new technologies to enhance existing products and services, and to expand the range of its offerings through R&D, licensing of intellectual property and acquisition of third-party businesses and technology. development from our other activities that are directed at ongoing innovation and enhancements to our innovations. Instead, we manage the total investment in our employees and infrastructure across all our product and service offerings, rather than viewing it as related to a particular product or service; we view and manage these costs collectively as investments being made on behalf of our customers to improve the customer experience. We believe this approach to managing our business is different from the concept of planned and focused projects with specific objectives that were contemplated when the accounting standards for research and development were developed under FAS 2 (Financial Accounting Standards). Given the significant breadth of projects and improvements that we have underway, our employees routinely work concurrently on multiple projects, including projects that could be defined as research and development in nature and also more routine, ongoing activities to refine, enrich, or otherwise improve or adapt our existing products and services. Similarly, our activities may focus on developing new products and services, but these activities often result, in whole or in part, in enhancements to existing products and services. (22 Jan. 2018) If you are unable to identify or estimate research and development costs, explain in detail the reasons for your inability. (16 Feb. 2018) In reassessing this conclusion in response to your comment, we discussed with our investor relations department whether quantifying traditional research and development costs within the scope of ASC 730-10-55-1 would be meaningful or useful for investors, and we also reviewed our earnings call transcripts for the past three years to see whether investors ask questions about research and development costs within the scope of ASC 730-10-55-1. These discussions and review reaffirmed that such costs are not material for two reasons. First, as discussed above, because of the range of innovation activities we undertake to support the hundreds of millions of different products and services that we offer, aggregate research and development cost data would not indicate any particular area of activity and would not reveal trends with regard to development efforts that are material to an understanding of our business. Second, we believe that distinguishing between costs attributable to activities of the type described in ASC 730-10-55-1 and those attributable to activities described in ASC 730-10-55-2 would be confusing and misleading to investors, as the resulting disclosures would not fairly present the investments we make in order to offer a wide variety of products and services to our customers. (9 Mar. 2018) We have completed our review of your filing. We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff.

Amazon's claims to the traditional R&D definition
The US generally accepted accounting principles (GAAP) provided by FASB-ASC 4 illustrates activities typically included and excluded from R&D by defining Research & Development [36]. 5 While the former activities correspond to those of contributing to significant improvement, the latter activities contribute only to routine or periodic alterations (see the details of the illustration in Appendix 1).
Amazon claims that the boundary between the two types of activities has been blurring in the digital economy, and also that it is difficult to separate them, as its R&D activities are implemented in such a way as simultaneous research, design, development, and maintenance of both new and existing products and services occur in a holistic business operation. Also, Amazon's R&D has been conducted in transforming routine or periodic alterations into significant improvement during the R&D process as it absorbs soft innovation resources from external environments and assimilates them into its routine or periodic alterations activities, leading to the transformation of these activities into activities that lead to significant improvement.

Exponential increase in R&D triggered by AWS-based services
Amazon's business model and endeavors to be at the frontier of innovation challenge in AWS, Kindle, Alexa and Amazon Go develop its growing empire, fusing the physical and the digital toward "selling anything that can be sold online" and also the subsequent big data collection system, as demonstrated in Fig. 6.
It should not be overlooked that the smooth establishment of such a system can also be attributed to its intensive lobbying efforts, as the Amazon empire has been enabled by breaking through traditional regulations and the protection of existing industries. This breakthrough accelerates the blurring of the boundary between the two types of activities reviewed in the preceding section. Expenditure for such lobbying efforts has increased dramatically from the beginning of the second decade of this century, amounting to more than double the similar expenditure initiated by Apple, as demonstrated in Fig. 8.
From November 2010 all Amazon's retail web services have been transformed into AWS-based services by migrating to AWS [38]. This transformation has leveraged a dramatic increase in R&D (expenses on technology and content) aiming at offering a wide variety of products and services to its customers. Its R&D exceeded that of Apple from 2011 and triggered its lead, as demonstrated in Fig. 9. Since then Amazon has transformed into a highly R&D-intensive firm, as demonstrated by the notable increase in its R&D intensity (ratio between R&D and sales), as demonstrated in Fig. 10. While an increase in R&D contributes to an increase in sales, which increases profits, Amazon reinvests such profits to R&D based on its resource allocation strategy, as reviewed earlier.
Consequently, Amazon's R&D intensity has continued to increase since 2010, whereas this intensity was not time-dependent before 2009, as demonstrated in Table 4.
where The figures in parentheses indicate t-statistics: All are significant at the 1% level, except * is not significant. Table 4 demonstrates that R/S has increased exponentially since 2010, whereas this intensity was not time-dependent before 2009.
Consequently, above transformation into AWS-based services in 2010 has triggered extremely high-level R&D intensity (higher than double that of Apple's intensity level), as compared in Table 5. 4 The Accounting Standards Codification (ASC) of the Financial Accounting Standards Board (FASB). 5 Research is a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service (hereinafter "product") or a new process or technique (hereinafter "process") or in bringing about a significant improvement to an existing product or process. Development is the translation of research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process, whether intended for sale or use. It includes the conceptual formulation, design, and testing of product alternatives, construction of prototypes, and operation of pilot plants.

User-driven innovation induced by R&D-driven business model
Such a spiraling increase in Amazon's R&D has enabled Amazon to offer a wide variety of products and services to its customers, corresponding to its very first leadership principle: Customer obsession as reviewed in 3.1.
This accomplishment is evidenced by the high level of its stock prices, as demonstrated in Fig. 11 and Table 6. This high level of prices has led to the skyrocketing increase in Amazon's market capitalization, as reviewed earlier in Figs Translog (transcendental logarithmic) expansion on the first term: Regression analysis by backward elimination method at 20% significance level identifies.
ln ST = A + b ln OI + c ln R in both firms examined as the affluence of OCF can be appraised by OI and future prospects of these firms can be demonstrated by R, rather than S growth. Table 6 demonstrates that Amazon largely depends on R&D for offering a wide variety of products and services to its customers, but not significantly on operating income (OI) in its stock prices formation, while Apple depends on both OI and R&D aiming at improving its developed hardware and software every year. This analysis supports the postulation that Amazon has provided qualified multi-functional products and services to its customers, corresponding to its first leadership principle (customer obsession), using an R&D-driven business model.
The offering of such a wide variety of products and services, in turn, has induced user-driven innovation, typically observed in the invention of the Kindle [41]. The Kindle tablet came into existence defined purely by customers' desires rather than engineers' preferences (Baldacci, 2014).
Above contrast in R&D model between Amazon and Apple can be highlighted by comparing their development trajectories of focal inventions as AWS -Kindle -Alexa -Amazon Echo in Amazon, and PC -iPod -iPhone -iPad -HomePod in Apple. Fig. 12 compares development trajectories of these core inventions in two firms. Fig. 12 highlights identity of Amazon's R&D-driven business model by contrasting with that of Apple focusing on their core inventions as summarized in Table 7.
Such multi-functional products/services for new experiences to customers oriented business model has enabled Amazon to absorb external resources extensively and assimilate them into its indigenous business. Amazon has deployed the "architecture of participation," thus making the most of digital technologies by harnessing the power of its users to create even more value [23], as illustrated in Fig. 13. "Architecture of participation" was postulated by [24]; and implies that users help to extend the platform. Amazon's deployment of this strategy is quite similar to that of Canon, known as a coopetition strategy [42]. This strategy harnesses the vigor of mobile phone development in the consumer market leveraged by users, based on coopetition between Canon's printers, developed based on its own learning, and personal computers (PCs) developed by its rival firms [26], as illustrated in Fig. 14.
[21] demonstrated the significant effects of Amazon's coopetition. They demonstrated that, by collaborating with its competitors, Amazon has succeeded in building new capabilities, gaining better leverages and boosting its brand and technologies.
[43] also demonstrated Amazon's strategic action for coopetition. They stressed that Amazon seized the strategic opportunities presented by the successive wave of disruption, ruthlessly cannibalizing its own business where necessary. e-books were inevitable, so Amazon launched the Kindle, to which customer information and scale in data processing are critical, so it sold cloud services to its competitors. Unlike many of his rivals, Bezos saw business architecture as strategically valuable, not a given. He did not harness technology to the imperatives of his business model; rather, he adapted his business model to the possibilities of technology.
Like its willingness to sustain losses, this feature of Amazon's power largely confounds contemporary antitrust analysis, which assumes that rational firms seek to drive their rivals out of business. Amazon's game is more sophisticated. By making itself indispensable to e-commerce, Amazon enjoys receiving business from its rivals, even as it competes with them [22].

Neo open innovation activating a self-propagating function
User-driven innovation based on architecture of participation accelerates the dramatic advancement of the Internet, as O-Reilly's postulate of architecture of participation is a Web 2.0 concept in which a community of users contributes to the content or to the design and development process. Advancement of the Internet, in turn, accelerates co-emergence, awakening and inducement of soft innovation resources (SIRs) in the marketplace as illustrated in Fig. 15 [2,45]. Thus, coevolutionary co-emergence of user-driven innovation and emergence of SIRs can be expected. Here, SIRs are considered as a condensate and crystal of the advancement of the Internet and consist of the Internet based resources that have been either sleeping or untapped or are results of multisided interaction in the markets where consumer is looking for functionality beyond an economic value. The common feature of SIRs is that they are not accountable in the traditional GDP terms [1,2].
The authors in previous studies stressed the significance of increasing dependence on uncaptured GDP 6 by postulating that the Internet promotes a free culture that provides utility and happiness to people but cannot be captured through GDP. This added value of providing people with utility and happiness, which extends beyond economic value, is defined as uncaptured GDP [11,12]. The shift in people's preferences from the economic value to the supra-functionality beyond an economic value (encompassing social, cultural, and emotional values) 7 induces the further advancement of the Internet, which intensifies the increasing dependence on uncaptured GDP. User-driven innovation further accelerates this inducement. Thus, spinoff from co-evolution among traditional ICT, captured GDP, and economic functionality to new co-evolution among the   S: Sales, OI: Operating income, R: R&D expenditure. All US$ billion at current prices. 6 The Internet promotes a free culture that provides utility (satisfaction of consumption) and happiness to people through its consumption but this culture cannot be captured through GDP data which measure revenue. Such utility and happiness constituted uncaptured GDP. This can be defined as added value that provides utility and happiness beyond economic value to people but cannot be measured by traditional GDP accounts (captured GDP) which measure economic value. 7 Supra-functionality beyond economic value illustrates peoples' shifting preferences which encompass social (e.g., creation of and contribution to social communication), cultural (e.g., brand value, cool and cute), aspirational (e.g., aspiration of traditional beauty), tribal (e.g., cognitive sense, fellow feeling), and emotional (e.g., perception value, five senses) values [66]. advancement of the Internet, the increasing dependence on uncaptured GDP, and people's shifting preferences to beyond an economic value has been accelerated as illustrated in the upper double circle in Fig. 15 [11][12][13]46]. Under such a transforming circumstance, highly R&D intensive economies have been confronting a dilemma [2,9,10,45]. While they are satisfying people's shifting preferences of supra-functionality beyond an economic value, their economic productivity has been declining as R&D (centered on the advancement of the Internet) increases which is essential to satisfy economic functionality. Amazon cannot be an exception.
Solution to this critical dilemma can be expected by the hybrid role of SIRs [1,2].
Use of SIRs is a novel innovation mode applied in the highly digitalized ICT firms. The authors in previous studies described this hypothetical view [46] and identified that while such a transformative circumstance in the digital economy results in productivity decline, global ICT firms endeavor to survive by spontaneous creation of uncaptured GDP by harnessing the vigor of SIRs [10]. Amazon's endeavor is one of the typical case. One more finding from the authors' previous study is important background to the analysis described in this paper. It has been demonstrated that SIRs function to the removal of structural impediments of GDP growth such as conflict between public, employers and labor union, disparity of gender, and also increasing discrepancy toward an aging society. Thus, spontaneous creation of uncaptured GDP through effective utilization of SIRs contributes to resurgence of captured GDP growth by its hybrid function as illustrated in the lower part of Fig. 14 [10,47]. Fig. 15 demonstrates that SIRs awake and activate latent self-propagating function indigenous to ICT (see the detailed dynamism in Fig.  A1 in the Appendix 2). This activation induces functionality development leading to supra-functionality beyond an economic value that corresponds to people's shift in preferences. Furthermore, SIRs contribute to resurge captured GDP growth by removing structural impediments in this growth. Since supra-functionality accelerates coevolutionary innovation among this functionality, the advancement of the Internet, and uncaptured GDP dependence, SIRs function hybrid role in balanced advancement of both captured and uncaptured GDP. Sources: [39,40].

Assimilation of soft innovation resources
Given that emerged SIRs can be well assimilated in the business, these resources activate a self-propagating function which induces functionality development leading to supra-functionality beyond an economic value that satisfies customer's preferences shift without confronting the dilemma between R&D expansion and productivity decline (see the details of this dynamism in Appendix 2).
Therefore, assimilation capacity of SIRs plays a critical role in corresponding to customer's demand: customer obsession for Amazon. Amazon has developed a high level of this capacity as demonstrated in Fig. 16. Fig. 17 outlines a scheme of measuring dynamic assimilation capacity which demonstrates that Amazon's high level of assimilation capacity largely depends on its rapid and notable increase in R&D investment (high level of T Recalling SIRs unique role in removing structural impediments in growth as reviewed earlier, Amazon has effectively utilizes SIRs for transforming "routine or periodic alterations" into "significant improvement" during the R&D process by removing structural impediments in the former's transformation.

Enablers of transformation
The above business model has enabled Amazon to absorb external resources extensively through the Amazon empire chain, big data  collection system and architecture for participation, and assimilate them into its business. Given that this model deploys a full-fledged function, it may transform "routine or periodic alterations" (traditionally classified as non-R&D) into "significant improvement" (classified as R&D). Amazon declares that its activities may focus on developing new products and services, but these activities often result, in whole or in part, in enhancements to existing products and services. Web service has imposed a virtuous pressure that has incentivized everyone to improve reliability and performance [23].
Such a pressure leverages Amazon to maintain its strong points, such as having excellent customer service and ensuring complete customer satisfaction through such "Species survival and evolution systems" as. (i) Consistent innovation by means of (a) a peer review system, (b) easy checkouts, (c) user-tailored suggested products, (d) making changes proactively, and (ii) Performing disruption analysis on existing customer data for business changes [49].
A holistic management policy, rather than separate activities contributes to the broad dissemination of this transformation effect. Such transformation exercises are similar to experiments, which Bezos has been encouraging, by stressing that "It's not an experiment if you know in advance it's going to work. If you want to be inventive, you have to experiment a lot, which means you will fail a lot." He has advised shareholders that "You need to select people who tend to be dissatisfied by a lot of the current ways. As they go about their daily experiences, they notice that little things are broken in the world and they want to fix them. Inventors have a divine discontent." Thus, Bezos has characterized the company as an "invention machine" and inspired its workers to invent and continue to come up with innovative ideas [50]. The staff within Amazon are geniuses in their respective fields [51]. Bezos proudly notes that, "We have the good fortune of a large, inventive team and a patient, pioneering, customer-obsessed culture-great innovations, large and small, are happening every day on behalf of customers, and at all levels throughout the company. This decentralized distribution of invention throughout the company not limited to the company's senior leaders is the only way to get robust, highthroughput innovation" [34].
The value created is distributed among various stakeholders: shareholders, employees, executives, customers, creditors, and suppliers.
Under such a distinct CEO's policy and strong leadership thereof, at Amazon, experimentation is always occurring, initiated by employees in broad fields throughout the company, and ideas are constantly being presented to Bezos, leading to the satisfying of the first leadership principle: Customer obsession. Motivated employees understand that these ideas are going to be altered in many ways [33]. Consistent innovative thinking is another resource that Amazon has exploited advantageously [51,52].
This transformation is illustrated in Fig. 18. It has been popularized the following mathematical formula that Cash + Willingness to experiment + Stable leadership = Success (Levinson, 2007). It is evident that the company's unique team of employees and Jeff Bezos' visionary leadership have been instrumental in Amazon's success [51].
Unlike Apple, Google, and Microsoft, Amazon is not fixated on a tightly designed ecosystem of interlocking apps and services as demonstrated in Table 7. Bezos instead emphasizes platforms, each of which serves its customers in the best and fastest possible way. "Our customers are loyal to us right up until the second somebody offers them a better service," he says. "And I love that. It's super-motivating for us." That impulse has spawned an awesome stream of creative firsts [53] as if firing from the top right corner of Fig. 17.   Fig. 17. Scheme of measuring dynamic carrying capacity. Source: [48]. Given this impulse, Amazon may explore a newer R&D model that also transforms "routine or periodic alterations" into "significant improvement" by deploying the full-fledged function of its sophisticated management system to absorb external resources extensively and assimilate them into its business.

Leading to self-propagating R&D initiatives
The above analysis leads us to expect that Amazon's R&D model may provide a solution to a critical problem that the majority of ICT leaders have been confronting within the digital economy: the dilemma between R&D expansion and productivity decline [1,2]. This solution can be anticipated by activating a self-propagating function indigenous to ICT development [54]. This activation can be enabled by assimilating SIRs, as illustrated in Fig. 15, rather than depending on R&D expansion.
Thus, provided that Amazon's above business model: (Absorption of external resources + assimilation in own business + impulse towards customer obsession Transform "routine or periodic alterations" into "significant improvement") functioned as designed, investment used for this R&D model (investment of technology and the content of its annual report, as summarized in Table 3) should have duly emerged as a selfpropagating function.
In order to demonstrate this hypothetical view, a comparative analysis of technology-driven development trajectories between Amazon and Apple over a period from 2000 to 2017 was conducted. 8 As far as the development trajectory depends on the simple logistic growth (SLG) trajectory, its market value (V s (T)) saturates with a fixed upper limit (N). However, once the trajectory shifts to logistic growth within a dynamic carrying capacity (LGDCC) trajectory that incorporates a self-propagating function, the upper limit dynamically enhances as growth proceeds, thereby its digital value (V L (T)) can continue to increase supported by this function [54].
Recalling particular innovation that creates new carrying capacity during the process of diffusion (e.g., Internet, functional mobile phones, and smartphones), transforming endeavor against the preceding dilemma corresponds to shifting from SLG to LGDCC trajectory [2] as illustrated in Fig. 19. Fig. 20 and Table 8 examine the development trajectories in Amazon and Apple over the period from 2000 to 2017 by comparing SLG and LGDCC. 9 Looking at Fig. 20 we note that, while Apple attempted to shift from a SLG to a LGDCC trajectory, it has not entirely transformed into LGDCC, as its LGDCC trajectory is not necessarily statistically significant, as demonstrated in Table 8, and the magnitude of its selfpropagating function has been limited, as demonstrated in Fig. 20. Consequently, its market value has been accessing a plateau. Contrary to such a trajectory in Apple, Amazon has continued to increase its market value depending on the LGDCC trajectory, with a notable magnitude of self-propagating function, as demonstrated in Fig. 20.
The contrast in this market value trajectory between Apple and Amazon, while the former has been accessing a plateau and the latter has been continued to increase, can be endorsed by the trend in their number of patent applications, as demonstrated in Fig. 21. Since market value (V) increase induces R&D investment, leading to technology knowledge stock (T) increase, which is proportional to the number of patent applications (P), as demonstrated in Table 9 in R&Ddriven firms like Apple and Amazon, trends in their P have close relevance to their V trends (see the details of P trends in GAFA in Table  A3 in Appendix 3). Table 8 demonstrates that, contrary to Apple, which incorporates a certain statistical insignificance in its LGDCC trajectory, Amazon has developed an explicit technology-driven self-propagating function, as the LGDCC is statistically more significant than the SLG. This can be attributed to its unique R&D model. While investment used for this R&D model is described in its annual report as investment of technology (centered on expenses for employees and infrastructure costs directly linked to significant improvement) and content (including those for routine or periodic alterations), as summarized in Table 3, technology knowledge stock constructed by both investments demonstrated a duly emerged self-propagating function essential for overcoming the crucial problem in the digital economy.
This fact demonstrates that Amazon successfully transformed "routine or periodic alterations" into "significant improvement" sufficiently enough to overcome the critical problem in the digital economy.
In addition, Table 9 endorses the fact that Amazon's technology  The figures in parentheses indicate t-statistics: all are significant at the 1% level except *5% and **25% level, respectively. 8 See the details of the numerical analysis and data construction for the analysis in Table A2 in Appendix 3. 9 Estimation of LGDCC depended on the three-steps approximation approach [15]. Thus, we could conclude that Amazon's unique R&D model and subsequent unique R&D investment convince us of the significance of the transformation of the R&D concept in the digital economy.

Conclusion
In light of a rapid conspicuous increase in Amazon's R&D elevated it to the position of world's top R&D firm in 2017 based on its unique R&D model, and subsequent debate on the new concept of R&D in the digital economy, the transformative direction of R&D was examined.
By an empirical analysis focusing on Amazon's R&D-driven disruptive business model, a new concept of R&D in neo open innovation that harnesses the vigor of soft innovation resources was investigated.
It was identified that Amazon, which is based on R&D as a culture, has been promoting companywide experimentation to cause customers obsessed with making purchase decisions. This has enabled Amazon to deploy an architecture for participation that makes the most of digital technologies by harnessing the power of users. Such user-driven innovation accelerated a dramatic advancement of the Internet that, in turn, accelerated the co-emergence of soft innovation resources in the marketplace. This emergence activated a self-propagating function that induced functionality development, leading to supra-functionality beyond an economic value that satisfies a shift in customers' preferences, which Amazon has been treating as the highest priority. While this system depends on the assimilation capacity of soft innovation resources, Amazon has developed a high level of capacity, supported by a rapid and notable increase in R&D investment. Such a sophisticated management system has operated well because of strong inertia induced by the strongly customer-centric visionary leadership of Jeff Bezos (founder and CEO of Amazon), together with motivated, brilliant and consistently innovative employees equipped with species survival and an evolution system that watches for the necessity of disruptive  Source: [55]. business change. These efforts function as a virtuous cycle, leading to the transformation of "routine or periodic alterations" into "significant improvement." This virtuous cycle was demonstrated by a numerical empirical analysis showing that technological knowledge stock consisting of investment for both activities has duly emerged as a self-propagating function essential for overcoming the critical problem in the digital economy.
These findings give rise to the following insightful suggestions for reconstructing the R&D model in the digital economy, which incorporates a two-faced nature and a subsequent dilemma between R&D expansion and productivity decline: This analysis provides new insights for shedding light on exploring a practical solution to the dilemma between R&D expansion and productivity decline in the digital economy.
Future works should focus on further elucidation of the micro-dynamism of transformation of "routine or periodic alteration" into "significant improvement." Further identification of systems effects of R &D between Amazon's R&D model and models initiated by other network firms should also be focused on.
A priority of the national innovation system in the digital economy should be to accumulate the lessons from the new concept of R&D initiated by Amazon and use them to establish a new concept of R&D in neo open innovation. A government-initiated R&D ecosystem should be developed to complement the possible deficits of this new concept, particularly in smaller firms. This, in turn, will induce further sophistication of the Amazon model as a comprehensive system.
where p x and r x : coefficients.
Given the logistic growth nature of ICT, V can be developed by an T-driven logistic growth function.
where N: carrying capacity; and a: velocity of diffusion. Equation (6) develops the following simple logistic growth function (SLG): where b: coefficient indicating the initial level of diffusion; V S (T): T-driven SLG-based development trajectory.
In particular innovation which creates new carrying capacity N(T) during the process of diffusion, equation (6) is developed as follows: Equation (8) develops the following logistic growth within a dynamic carrying capacity function (LGDCC) as depicted in equation (9) which incorporates self-propagating function as carrying capacity (N L (T)) increases corresponding to V L (T) (T-driven LGDCC-based development trajectory) increase as depicted in equation (10) where R: R&D expenditure ( T). Equation (11) suggests that activation of self-propagating function by increasing growth rate depends on increases in marginal productivity of technology ( ) V T and R&D intensity (R/V). Given the declining trend in marginal productivity of technology in the digital economy due to two-faced nature of ICT, 10 growth rate increase can be expected by increasing R&D intensity. However, considering the dilemma between R&D expansion and productivity decline that R&Dintensive firms have been confronting, only a solution can be found through effective utilization of external innovation resources, centered on soft innovation resources (SIRs) from external market [2] as illustrated in Fig. A1.   Fig. A1. Dynamism in Assimilating External Innovation Resources for Sustainable Growth. 10 While advancement of ICT generally contributes to enhanced prices of technology by new functionality development, the dramatic advancement of the Internet reacts to decreased prices of technology due to its nature of freebies, easy and free replication, and mass standardization [11]. Amazon's endeavor in transforming resources for "routine or periodic alterations" activities into resources functioning "significant improvement" by absorbing soft innovation resources from the external market and assimilating them in its business can provide practical solution to this dilemma as illustrated in Fig. A2.   Fig. A2. Dynamism of Amazon's Transforming Routine or Periodic Alterations into Significant Improvement. R: R&D expenditure; K: tangible assets, SIRs: soft innovation resources. S: Sales, R: R&D expenditure, V: Market value, T: Technology knowledge stock [58]. where : Rate of depreciation of sold goods and services; : Rate of obsolescence of technology; m: Leadtime between R&D and commercialization;