The Modus Operandi of Industrial and Economical Espionage

 

“The life of spies is to know, not to be known”

George Herbert

 

A stolen recipe in ancient Greece led to one of the first cases of industrial espionage.

This, and other historical precedents, are discussed in relation to contemporary industrial espionage by (Tarantola, A , 2020) who analysed the events that took place in the ancient Greek city of Sybaris.

Another well-known example occurred in the 1800s, when the British East India Company hired the botanist, Richard Fortune, to smuggle tea cuttings out of China. These were used to cultivate the Indian tea industry, which eclipsed that of the Chinese in a few decades. (Rose 2010)

In short, it would seem that the earliest example of industrial espionage was based around the theft of intellectual property, more specifically, a recipe. From this, we can make a tentative inference about the structural forces at play that underpin contemporary equivalents. That is, people have an insatiable desire to know how, why and what their competitors have that is giving them a business edge.

By nature, both industrial and economic espionage, are simultaneously aggressive and defensive. They are aggressive in the sense that steps are taken to pursue and achieve a competitive advantage over competitors by utilising methods of operational intelligence gathering, as well as methods of sabotage and subversion. Both types of espionage are also defensive, and this is seen in activities that concentrate on the use of deception of competitors and/or foreign intelligence services by utilising methods such as information warfare and counterintelligence processes.

Industrial and economic espionage are considered illegal activities. However, it would be an inaccurate characterisation to say that most industrial and economic espionage activities that take place are, strictly speaking, illegal. The majority of such activities are performed using methods that are mainly legal. For example, collecting information about a competitor or product via open-source information, friendly discussions with a competitor’s employees, purchases of a competitor’s product (which are then used to attempt to reverse engineer its design), or head-hunting key employees in the hope that they can be enticed into breaking their exit contract with their previous employer.

Countries and States will utilise illegal means to conduct information/intelligence gathering operations regarding the economic capabilities of other countries, as well as the products of private entities, so long as doing so is to their benefit and it is deemed an acceptable risk relative to the potential gains afforded.

Cyber crime is one of the common examples of State-sponsored espionage. Indeed, the head of the UK’s secret service revealed back in 2012, how a UK company had suffered an AU$1.5bn loss from a state-sponsored cyber-attack in lost intellectual property and disadvantages in contract negotiations (Shah 2012).

In his article (Webb, T, 2011) provided a comprehensive list of industrial and economic espionage cases which involved corporations. The main scope of industrial espionage was information. The author outlined that industrial espionage evolved in terms of re-selling information to third parties or back to the owner of information.

The above-mentioned article illustrates that industrial and economic espionage represent a diverse umbrella of different activities with the key objective being to require information which puts a certain industry, corporation or a country in a better competitive position. In doing this, it can simultaneously, cause tremendous financial losses to the corporation which has been breached and information stolen.

Fierce global competition can drive corporations and countries to bend rules and start analysing competitors including their defence capabilities, production and economic survival.

The task of industrial espionage is not only to gather information but to explore the vulnerabilities of the competitor and the economic assessment of countries.

In summary, much industrial and economic espionage is not technically illegal but can stray into grey areas. Reverse engineering a product or hiring employees from competitors is commonplace and legal, whereas covert surveillance and hacking crosses the line.

Companies should be aware of competitors’ activities and the opportunities that can be created through legal and effective intelligence gathering methods as well as illegal ones.

 

 

1. Rose, S. 2010. For all the tea in China. Westminster: Penguin. Google Scholar

2. Shah, S. (2012). Corporate espionage on ‘an industrial scale’ targeting the UK. Retrieved from https://www.computing.co.uk/ctg/news/2187123/corporate-espionage-an-industrial-scale-targeting-uk.

This post was written by Mario Bekes