 Cross-Country Economic Espionage and Investment in Research and DevelopmentPo-Lu Chen International Journal of Economics and Finance, 2016, vol. 8, issue 4, 146-155 Abstract: This paper investigates the impact of cross-country economic espionage on innovation incentives and welfare by considering both ex ante and ex post effects of espionage. I consider two firms residing in two countries with two types of innovation, cost-reducing research and development (R&D) and information technology R&D, and find that espionage activity reduces both firms¡¯ investment in cost-reducing R&D. The change in consumer¡¯s welfare due to espionage depends on two offsetting effects and is ambiguous. I also discuss the effect of sales ban policy on deterring espionage. I find that sales ban policy may alternatively encourage investment in espionage activities if market size is small. Whether sales ban policy can improve consumer¡¯s welfare depends on the market size. When market size is large that espionage activities are deterred by sales ban, then more capital devoted to cost-reducing R&D leads to higher consumer welfare. However, if market size is small that espionage is not deterred, then monopolistic position of the local firm under sales ban policy hurts local consumers. Keywords: espionage; research and development; R&D; sales ban; information technology; internet hacking (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:8:y:2016:i:4:p:146-155 Access Statistics for this article More articles in International Journal of Economics and Finance from Canadian Center of Science and Education Contact information at EDIRC. |
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