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Industrial Espionage and Productivity

Author

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  • Glitz, Albrecht

    (Universitat Pompeu Fabra)

  • Meyersson, Erik

    (Stockholm School of Economics)

Abstract

In this paper, we investigate the economic returns to industrial espionage by linking information from East Germany's foreign intelligence service to sector-specific gaps in total factor productivity (TFP) between West and East Germany. Based on a dataset that comprises the entire flow of information provided by East German informants over the period 1970–1989, we document a significant narrowing of sectoral West-to-East TFP gaps as a result of East Germany's industrial espionage. This central finding holds across a wide range of specifications and is robust to the inclusion of several alternative proxies for technology transfer. We further demonstrate that the economic returns to industrial espionage are primarily driven by relatively few high quality pieces of information and particularly strong in sectors that were closer to the West German technological frontier. Based on our findings, we estimate that the average TFP gap between West and East Germany at the end of the Cold War would have been 6.3 percentage points larger had the East not engaged in industrial espionage.

Suggested Citation

  • Glitz, Albrecht & Meyersson, Erik, 2017. "Industrial Espionage and Productivity," IZA Discussion Papers 10816, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10816
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    Cited by:

    1. Andreas Lichter & Max Löffler & Sebastian Siegloch, 2021. "The Long-Term Costs of Government Surveillance: Insights from Stasi Spying in East Germany," Journal of the European Economic Association, European Economic Association, vol. 19(2), pages 741-789.
    2. Bahar, Dany & Choudhury, Prithwiraj & Rapoport, Hillel, 2020. "Migrant inventors and the technological advantage of nations," Research Policy, Elsevier, vol. 49(9).
    3. Akcigit, Ufuk & Alp, Harun & Diegmann, André & Serrano-Velarde, Nicolas, 2024. "Committing to grow: Employment targets and firm dynamics," IWH Discussion Papers 17/2023, Halle Institute for Economic Research (IWH), revised 2024.
    4. Ali Sina Önder & Sascha Schweitzer & Olga Tcaci, 2024. "Innovation and Regional Development: The Impact of Patenting on Labor Market Outcomes," Working Papers in Economics & Finance 2024-07, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    5. repec:zbw:bofitp:2018_008 is not listed on IDEAS
    6. Hipp Ann & Fritsch Michael & Greve Maria & Günther Jutta & Lange Marcel & Liutik Christian & Pfeifer Beate & Shkolnykova Mariia & Wyrwich Michael, 2024. "Comprehensive Patent Data of the German Democratic Republic 1949–1990," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 244(1-2), pages 149-158, February.
    7. Dorner, Matthias & Harhoff, Dietmar, 2018. "A novel technology-industry concordance table based on linked inventor-establishment data," Research Policy, Elsevier, vol. 47(4), pages 768-781.
    8. Wang, Wenjie & Zhang, Yichong, 2024. "Wild bootstrap inference for instrumental variables regressions with weak and few clusters," Journal of Econometrics, Elsevier, vol. 241(1).
    9. Dany Bahar & Andreas Hauptmann & Cem Özgüzel & Hillel Rapoport, 2019. "Migration and Post-conflict Reconstruction: The Effect of Returning Refugees on Export Performance in the Former Yugoslavia," Growth Lab Working Papers 149, Harvard's Growth Lab.
    10. Paul Hunermund & Ann Hipp, 2024. "Inventor Mobility After the Fall of the Berlin Wall," Papers 2409.01861, arXiv.org.
    11. Dorner, Matthias & Harhoff, Dietmar, 2018. "A novel technology-industry concordance table based on linked inventor-establishment data," Research Policy, Elsevier, vol. 47(4), pages 768-781.
    12. Lyubimov, Ivan & Gvozdeva, Margarita & Lysyuk, Maria, 2018. "Towards increased complexity in Russian regions : networks, diversification and growth," BOFIT Discussion Papers 8/2018, Bank of Finland, Institute for Economies in Transition.
    13. Ufuk Akcigit & Harun Alp & André Diegmann & Nicolas Serrano-Velarde, 2023. "Committing to Grow: Privatizations and Firm Dynamics in East Germany," Working Papers 685, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    14. repec:iab:iabfme:201707(en is not listed on IDEAS
    15. David Kunst, 2019. "Deskilling among Manufacturing Production Workers," Tinbergen Institute Discussion Papers 19-050/VI, Tinbergen Institute, revised 30 Dec 2020.
    16. William Akoto, 2024. "Who spies on whom? Unravelling the puzzle of state-sponsored cyber economic espionage," Journal of Peace Research, Peace Research Institute Oslo, vol. 61(1), pages 59-71, January.
    17. Barrachina, Alex & Forner-Carreras, Teresa, 2022. "Market must be defended: The role of counter-espionage policy in protecting domestic market welfare," Information Economics and Policy, Elsevier, vol. 58(C).
    18. Dany Bahar & Andreas Hauptmann & Cem Özgüzel & Hillel Rapoport, 2018. "Let their Knowledge Flow: The Effect of Returning Refugees on Export Performance in the Former Yugoslavia," CESifo Working Paper Series 7371, CESifo.
    19. D'Acunto, Francesco & Schnorpfeil, Philip & Weber, Michael, 2022. "Big brother watches you (even when he's dead): Surveillance and long-run conformity," LawFin Working Paper Series 51, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    20. Frieling, Titus, 2021. "Innovation under central planning: patenting and productivity in the GDR," LSE Research Online Documents on Economics 112938, London School of Economics and Political Science, LSE Library.
    21. Ann Hipp & Udo Ludwig & Jutta Günther, 2021. "Unable to innovate or just bad circumstances? Comparing the innovation system of a state-led and market-based economy," Bremen Papers on Economics & Innovation 2111, University of Bremen, Faculty of Business Studies and Economics.
    22. Ann Hipp & Björn Jindra & Kehinde Medase, 2024. "Overcoming barriers to technology transfer: empirical evidence from the German Democratic Republic," The Journal of Technology Transfer, Springer, vol. 49(5), pages 1787-1821, October.

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    More about this item

    Keywords

    espionage; productivity; R&D; technology diffusion;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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