International trade and cyber conflict: Decomposing the effect of trade on state-sponsored cyber attacks

Abstract

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. 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 effects 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.

Identifying Key Relationships between Nation-State Cyberattacks and Geopolitical and Economic Factors: A Model

“…On the other hand, without mentioning APTs, but using the term state-sponsored cyberattacks, [32] analysed incidents of such attacks regarding intra-and interindustry trade. e evaluation of the proposal involves variables such as cyberespionage campaigns, information about trade data, GDP per capita, or conflict data.…”

“…In light of existing studies, some of them focus on APTs and some other on social or sociopolitical matters related to cyberattacks, but no proposal has modelled and analysed relationships between APTs and GPE concerns. Moreover, in terms of methodology, [32] is the only proposal that applies regression models as in our proposal (introduced later in Section 3.2). However, their models are different as they are used for different purposes.…”

“…Finally, considering datasets, most of them focus on cyberattacks in general, not in APTs. Just [32,34] used a dataset involving some APT but their number is quite limited. As a matter of fact, most of their cyberattacks are already included in our study (see Section 3.2.1 for details on our dataset).…”

Accountability and cyber conflict: examining institutional constraints on the use of cyber proxies

“…Information gathered via proxies can enable states-particularly militarily weak ones-to gain a competitive advantage and prepare for war. Espionaged information may also be critical in helping states advance their military technologies, disrupt adversary's plans and favorably frame issues of contention (Akoto, 2021b).…”

“…The use of cyber proxies has sparked a budding cyber politics literature that explores the relationship between cyber proxies and their state sponsors (see e.g. Akoto, 2021b;Borghard and Lonergan, 2016;Lotrionte, 2015;Maurer, 2018). However, scholars are yet to examine interstate variation in the use of cyber proxies.…”