What Is Industrial Espionage?

The term industrial espionage refers to the illegal and unethical theft of business trade secrets for use by a competitor to achieve a competitive advantage. This activity is a covert practice often done by an insider or an employee who gains employment for the express purpose of spying and stealing information for a competitor. Industrial espionage is conducted by companies for commercial purposes rather than by governments for national security purposes.

Key Takeaways

  • Industrial espionage is the illegal and unethical theft of business trade secrets for use by a competitor to achieve a competitive advantage.
  • It is often done by an insider or an employee who gains employment for the express purpose of spying and stealing information for a competitor.
  • Industrial espionage has grown with the help of the internet and lax cybersecurity practices.

Understanding Industrial Espionage

Industrial espionage describes a series of covert activities in the corporate world such as the theft of trade secrets by the removal, copying, or recording of confidential or valuable information in a company. The information obtained is meant for use by a competitor. Industrial espionage may also involve bribery, blackmail, and technological surveillance.

Also referred to as corporate spying or espionage or economic espionage, industrial espionage is most commonly associated with technology-heavy industries—particularly the computer, biotechnology, aerospace, chemical, energy, and auto sectors—in which a significant amount of money is spent on research and development (R&D).

The world's biggest practitioners of industrial espionage correspond to companies in countries with the biggest economies. One of the reasons why corporations engage in industrial espionage is to save time as well as huge sums of money. After all, it can take years to bring products and services to market—and the costs can add up.

In recent years, industrial espionage has grown with the help of the internet and lax cybersecurity practices, though such acts have become easier to detect. Social media is a new frontier for industrial espionage and its full impact and utility are still being measured. Penalties for industrial espionage can be significant, as seen in 1993 when Volkswagen stole trade secrets from General Motors which led to a $100 million fine.

Special Considerations

Industrial espionage tends to involve inside jobs in which employees steal secrets for financial gain or to hurt target companies. In certain—and more unlikely—cases, individuals may break into a company facility to steal documents, computer files, or pick through a company's trash for valuable information. There's a greater chance, though, that an industrial spy will use the internet to hack into a company's network to gain access to trade secrets on work computers and servers. It may also be conducted by governments as they pursue economic or financial goals.

A relatively new area of industrial espionage involves denying a competitor the use of their information, services, or facilities by way of computer malware, spyware, or a distributed denial-of-service attack (DDoS). Such industrial espionage tools are helpful in exploiting vulnerable systems.

Types of Industrial Espionage

Industrial espionage can be divided into two types. The first and most common actively seeks to gather intelligence about a company or organization. It may include the theft of intellectual property, such as manufacturing processes, chemical formulas, recipes, techniques, or ideas. Industrial espionage may also entail the concealment or denial of access to key information related to pricing, bidding, planning, research, and more. Such a practice is meant to create a competitive advantage for the party who has the information.

Industrial Espionage vs. Competitive Intelligence

Industrial espionage should be differentiated from competitive intelligence. The latter, also called corporate intelligence, is the legal gathering of public information by examining corporate publications, websites, and patent filings in order to determine a corporation's activities. Unlike industrial espionage, competitive intelligence is an ethical practice, where information may be collected from one or multiple sources. It helps corporations understand the competitive landscape as well as any and all challenges it may present.