As cyber threats become increasingly central to international politics, state-sponsored cyber attacks have become an instrument of geopolitical leverage. Emerging evidence shows that states are increasingly turning to cyber industrial espionage to boost the competitiveness of domestic firms. Leveraging data on cyber attacks and stock market returns for a sample of U.S. based cybersecurity defense contractors from 2000 to 2020, this study empirically demonstrates that an escalation in the intensity of state-sponsored cyber attacks prompts a behavioral shift among investors and regulators, leading to increased co-movement in firms’ stock returns.

In September 2001, operatives for Procter & Gamble were caught diving in dumpsters outside a Unilever facility in Chicago in search of documents and other discarded items containing confidential information about Unilever’s hair care products business. To avoid litigation and the negative publicity that often accompanies such disputes, the companies quietly reached a negotiated settlement where Procter & Gamble agreed to not use any of the information obtained. This early example illustrates the ongoing vulnerability companies face regarding data security. In today’s corporate environment where digital data storage is the norm, companies now have to be wary of not only paper documents but also discarded storage devices like hard drives, USBs, and even old office equipment that might store digital data.

Traditional conceptions of state-sponsored cyber economic espionage suggest that countries with different product profiles should experience high levels of espionage between them. However, this is not what we observe empirically. This article offers new insights into the strategic calculations that underpin state-sponsored cyber espionage and challenges scholars and policymakers to rethink the dynamics of international economic competition and security in the digital age.

The study of economic espionage has been dominated by scholarship focused on its legal and legislative aspects. However, economic espionage has important political economy dynamics that have largely gone unexplored. This is unfortunate because recent technological advances and changing dynamics of interstate economic competition mean there is much scope for a progressive research agenda focused on the political economy of cyber economic espionage. This chapter outlines key under-researched areas where the most progress is possible. I advocate for studies focused on examinations of the motives of cyber economic espionage, its conduct, how governments respond to it and how it is influenced by economic interdependence.

In February 2018, the cybersecurity firm FireEye published a report detailing the activities of a hacker group called APT37, which had carried out a series of cyberattacks across Asia. The report assessed “with high confidence” that the group was acting on behalf of the North Korean government. This is just one example of a rising trend, as states increasingly turn to “cyber proxies”—hacker groups that carry out cyber operations on behalf of or in concert with nation states.

As state-sponsored cyber operations have proliferated, some states are outsourcing these operations to non-state cyber proxies. However, given the relative ease of outsourcing cyber operations, it is puzzling why more states are not engaged in this practice. This study examines how domestic accountability institutions potentially explain this restraint in the use of cyber proxies.

In the wake of the major espionage operation in which people alleged to be Russian government agents infiltrated the digital networks of the U.S. Defense, Treasury and Homeland Security departments – as well as other government agencies and private companies – President Joe Biden is considering how to respond. It’s not clear exactly what data the hackers actually stole in the time they had access, roughly from March through December 2020, but they exploited software made by the Texas-based firm SolarWinds to gain access to key research and security information, including research for future nuclear weapons.

A state’s decision to engage in cyber operations has important implications for its trade. Successful cyber espionage could yield valuable trade secrets that could boost domestic production and spur economic growth. On the other hand, uncovered cyber operations could invite devastating sanctions that retard economic development. In spite of this, the nexus between trade and cyber attacks has received little attention in the literature. In this article, I explore how a state’s trade relations affect its propensity to engage in cyber attacks.