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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 for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10816
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    References listed on IDEAS

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    1. Tim Friehe & Markus Pannenberg & Michael Wedow, 2015. "Let Bygones be Bygones? Socialist Regimes and Personalities in Germany," CESifo Working Paper Series 5440, CESifo Group Munich.
    2. Maria Guadalupe & Olga Kuzmina & Catherine Thomas, 2012. "Innovation and Foreign Ownership," American Economic Review, American Economic Association, vol. 102(7), pages 3594-3627, December.
    3. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
    4. Lichter, Andreas & Loeffler, Max & Siegloch, Sebastian, 2015. "The Economic Costs of Mass Surveillance: Insights from Stasi Spying in East Germany," IZA Discussion Papers 9245, Institute for the Study of Labor (IZA).
    5. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, June.
    6. Zvi Griliches, 1998. "R&D and Productivity Growth at the Industry Level: Is There Still a Relationship?," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 213-240 National Bureau of Economic Research, Inc.
    7. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    8. Cameron, Gavin & Proudman, James & Redding, Stephen, 2005. "Technological convergence, R&D, trade and productivity growth," European Economic Review, Elsevier, vol. 49(3), pages 775-807, April.
    9. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
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    Cited by:

    1. Lichter, Andreas & Loeffler, Max & Siegloch, Sebastian, 2015. "The Economic Costs of Mass Surveillance: Insights from Stasi Spying in East Germany," IZA Discussion Papers 9245, Institute for the Study of Labor (IZA).
    2. Dorner, Matthias & Harhoff, Dietmar, 2017. "A novel technology-industry concordance table based on linked inventor-establishment data," FDZ Methodenreport 201707_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    R&D; productivity; espionage; technology diffusion;

    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 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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