Why Spy: Is There A Global Rationale To Economic Espionage?

Michael D. Moberly   October 13, 2009

For 20+ years, I have been a consistent contributor to helping companies prevent and mitigate the adverse effects of economic espionage, trade secret theft, IP infringement, etc.  Recently however, I re-read a 1999 paper authored by (then) University of Calgary researchers’ Merrill Whitney and James Gaisford in which they consider how ‘economic espionage can yield desirable strategic effects as well as cost savings for firms in a spying country.  Duh!! 

A particularly unique argument offered by Whitney and Gaisford is that when two technology producing countries spy on each other it is possible that both will be better off because the technology transfer, implicit in economic espionage, makes the outcomes beneficial to consumers.  Professionally, I find any potential mutuality of the benefits (from economic espionage) elusive, especially, if your firm is the victim.  

More often, a consequence of economic espionage, when successfully executed, is that it produces (a.) a distinct winner; defined as the spying country and/or company gaining significant ‘time to market’ advantages without incurring the time and extraordinary cost of R&D, pilots, marketing, supply chaining, etc., and (b.) a distinct loser; defined as the target/victim company-innovator being unable to realize the full and rightful economic benefits (and recoup a return-on-investment) from their time, labor, and costs, etc.

Continual innovation (for a country and/or individual company) is a significant factor in economic growth. It requires substantial and consistent investments in time, money and resources.  If innovative – technology producing companies are consistently vulnerable to economic espionage, i.e.,  losing all or significant parts of their innovation and competitive advantages, etc., it becomes increasingly challenging, if not impossible, for them to achieve sustainability insofar as being able to fully utilize and exploit the intangible assets they produce.  In addition, if a company (victim of economic espionage) is unable to recoup their ‘investment’, its equally likely their motivation and/or receptivity to engage in more innovative initiatives will be depressed/curtailed. 

Other probable consequences to economic espionage are pollution of legitimate supply chains with inferior – counterfeited products, along with (personal, business) privacy being threatened when economic espionage is condoned, promoted, and ultimately becomes profitable as it is today. 

While some readers may interpret the Whitney and Gaisford premise as merely being ‘wacky’ and out-of-touch with (global) business realities, I am inclined to characterize it as perspective and insight for elevating understanding not solely about economic espionage, but, our globally predatorial economic – competitive advantage adversaries who consistently engage in it. 

(Adapted by Michael D. Moberly from the work of Merrill Whitney and James Gaisford,  ‘Why Spy? An Inquiry Into The Rationale For Economic Espionage’ published in the International Economic Journal, Vol.13, No.2, Summer, 1999)

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