Economic Espionage, Knowledge Flows, and Firm Performance

Albrecht Glitz, Adrian Lerche and Lukas Mergele

No 26255, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: Economic espionage is a pervasive global phenomenon. We study how knowledge acquired through this clandestine activity affects firms' economic performance. Exploiting historical data from East Germany that trace the flow of scientific-technical information from its sources in the West to its recipients in the East, we show that economic espionage increased firms' productivity and reshaped their production structure and input choices. We further find that the resulting technical change was labor-augmenting and that the associated productivity gains propagated through the production network via input-output linkages. In the long run, firms receiving larger inflows of espionage information were significantly more likely to survive the transition to a market economy following German reunification.

Keywords: Espionage; Knowledge Flows; Firm Adjustments; Productivity (search for similar items in EconPapers)
JEL-codes: L2 N4 O3 P2 (search for similar items in EconPapers)
Date: 2026-09
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