International trade and cyber conflict: Decomposing the effect of trade on state-sponsored cyber attacks
| Date | 01 September 2021 |
| Author | William Akoto |
| Published date | 01 September 2021 |
| DOI | 10.1177/0022343320964549 |
| Subject Matter | Regular Articles |
International trade and cyber conflict:
Decomposing the effect of trade
on state-sponsored cyber attacks
William Akoto
Department of Political Science, Fordham University
Abstract
A state’s decision to engage in cyber operations has important implications for its trade. Successfulcyber 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 retardeconomic 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. I develop a theoretical framework that
links the composition of a state’s trade to its deficit in proprietary information relative to other states. I decompose
trade into its inter- and intra-industry components and show that while inter-industry trade is associated with higher
incidence of state-sponsored cyber attacks, intra-industry trade has the opposite effect. I also show that these effe cts
are non-monotonic, varying by the share of inter- or intra-industry trade in total trade. The results also show that
states that have a heavy concentration of high-tech industries such as aerospace, computers, and pharmaceuticals
have a higher propensity to engage in cyber espionage operations. These results are robust to a variety of controls and
specifications.
Keywords
cyber attacks, cyber conflict, cyber espionage, international trade, state-sponsored intra-industry trade
Introduction
The existing literature shows that the possession of
corporate proprietary information (or ‘trade secrets’)
isoftencriticalinenablingfirmstoproduceand
export goods that their competitors cannot produce
or produce to the same quality standards (Ettredge,
Guo & Li, 2018). This gives such firms an economic
and competitive advantage over their market rivals. By
the same token, countries that concentrate a lot of
firms with proprietary information are able to pro-
duce and export goods that other states cannot. This
increases the global market share of these countries
for the goods concerned (Hauswald & Marquez,
2006; Yazdanifard & Nia, 2011) and offers important
economic, strategic and coercive leverage over states
that import or are dependent on these goods. This
gives dependent countries an important motive to
access this proprietary information, frequently via
cyber attacks.
1
In this vein, successful cyber espionage
operations could be incredibly beneficial to a state’s trade.
Apart from enabling the production of more advanced
goods, information obtainedvia successful cyber espionage
could potentially shift profits from foreign to domestic
firms and thus serves as a form of strategic trade policy
(Whitney & Gaisford, 1996). An example of this is the
US firm SolarWorld, who reportedly lost $120 million in
revenue when Chinese solar panel manufacturers devel-
oped competing products based on trade secrets stolen
during a cyber attack in 2012 (Roselund, 2017).
Corresponding author:
william@willakoto.com
1
The terms cyber ‘attac ks’, ‘operations’, and ‘incidents’ are used
interchangeably.
Journal of Peace Research
2021, Vol. 58(5) 1083–1097
ªThe Author(s) 2021
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DOI: 10.1177/0022343320964549
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