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Industrial Espionage: The Threat to Global Business

le 3 Juillet 2023

Industrial espionage, the practice of stealing trade secrets and intellectual property theft from competitors or other companies, is on the rise. With the advancement of technology and increasing interconnectedness of the world, industrial espionage has become more sophisticated and prevalent than ever before. This has raised concern in all businesses worldwide, especially with the rise of digital technology, it has become easier for companies to gain access to sensitive information and cause irrecoverable damage to companies.

Targets of Industrial Espionage

Industries that rely heavily on research and development such as IT, energy and aerospace are often targets of industrial espionage. These companies are investing a large amount of money in developing innovative technologies and solutions which makes them a prime target for spies. It is also seen in retail, financial and public sectors as they face high competition and often do not invest heavily in cybersecurity.


China’s Multiple Attempts to Steal American Secrets

There are multiple cases in history that show trying to overturn America as the global leader using various attacks of industrial espionage with aims of gaining competitive edge in multiple industries. A recent case this year shows China’s attempt to steal American technology secrets by planting a spy at the energy company General Electric Power (Yong, 2023). The ex-employee Zheng specialised in turbine sealing technology and worked on a wide range of leakage containment technologies in steam turbine engineering. In China's aviation industry gas turbines and power aircraft are an essential part of future growth.

In order to reduce China's reliance on foreign technology, they are trying to rapidly develop their aerospace and aviation equipment. This poses a huge threat to US economic competitiveness as well as a national security threat. Intellectual property theft would benefit China by the development of products and technologies at a lower cost which would put American businesses at a disadvantage.

Methods of Industrial Espionage

Cyber attacks

Cyber-attacks are hostile attempts to interfere with information that has been gained by unauthorised access to a company’s computer system (Glassman et al., 2023).

Operation Night Dragon was one of the first cyber-attacks to occur in the energy industry with the purpose of stealing intellectual property (Miller, 2022). This was a large-scale attack that affected over 71 organisations in different industries from defence contractors to the United Nations and International Olympic Committee who all lost private information such as project financing information on oil and gas field bids. In order to gain additional internal access to be able to continue up the chain of command, they spear-phished mobile worker laptops to infect VPN-connected accounts. Password stealing tools were used to gain access to other systems, as well as RATs and malware in order to gain access to the computers of executives and retrieve their personal emails and files.

The hackers were found to be based in China, but it was unknown whether the attacks were authorised by the Chinese government or a private entity. It was difficult to decipher the exact origins of the attacks and the relatedness of them all due to the widely used methods that were used.

The case of Night Dragon highlighted the weakness in cyber security and set a benchmark for improvements.

Insider Threat
Competitors take advantage of insider threat by sending in spies to a company to gather intelligence and report back to them. They can also approach existing employees who have access to sensitive information and ask them for corporate secrets by offering money or using blackmail.
One major case that involved a consumer-packaged goods company was Gillette who fell victim to intellectual property theft in 1997 (Maremont and Peneira, 1997). A design engineer who had knowledge of Gillette’s secret new shaving system disclosed trade secrets to the company’s competitors. This is a classic example of insider threat, where the disgruntled employee acted on a personal grievance against a supervisor that led to the leaking of trade secrets to competitors.

Why Does Industrial Espionage Often Go Unnoticed?

Industrial espionage is extremely hard to detect and even harder to prove. The culprit may be international, and therefore it’s difficult to hold foreign companies and governments accountable, not to mention the long and expensive legal procedures that would follow.

In addition, if industrial espionage becomes public knowledge, it has the potential to harm stock pricing which can also cause conflict with shareholders. Furthermore, it can be perceived as a violation of IT compliance requirements as the information is often customers’ sensitive data, and if a company has fallen subject to industrial espionage the company will face a fine.

How Can Companies Protect Themselves from Industrial Espionage?

Economic Intelligence

The main purpose of all economic intelligence systems is to improve decision-making for economic policy and national economic interests. It is a strategy that is crucial in preventing economic threats to national security and also a tool that can be used to gain essential knowledge that will help companies in terms of decision making and a company’s positioning strategy to avoid espionage.

Several EI methods exist, ranging from improving data storage or providing staff access to key databases to actually creating an EI unit within your organization. A major change will need to take place within the company regarding attitudes towards information. The crucial step when building an EI system is to define the organization's needs while keeping it flexible enough to evolve (Moreno, 2002). The world’s most dominant economies have to restructure and redesign the public institutions that are in charge of national security that include diplomatic services and intelligence. Economic intelligence is a key component of this transformation.

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