Commercial Espionage or Learning by Hiring?
FOXCONN V BYD (A): COMMERCIAL ESPIONAGE OR LEARNING BY HIRING?
Foxconn International Holdings Limited (“Foxconn”) is the world’s largest contract manufacturer of mobile phones. Its competitor, BYD Company Limited (“BYD”), entered the market in 2003 and has initiated a learning-by-hiring strategy by actively recruiting workers from Foxconn. In May 2006, Foxconn first discovered a leakage of its trade secrets to BYD through current and former employees. Materials seized from BYD’s premises were found to contain substantial non-public information belonging to Foxconn. A number of individuals involved were arrested and prosecuted. However, BYD has declared that the information it possessed about Foxconn came from publicly available sources. Foxconn has concluded from internal investigation that BYD has been stealing its trade secrets systematically over a long period. Its management is contemplating pursuing criminal charges against BYD in order to protect its intellectual property (“IP”).
Conceptual Foundation and Teaching Objectives
This is a case on international business and strategy, exploring the learning-by-hiring strategy used by BYD to generate rapid growth in a new market sector. The case also addresses Foxconn’s court case against BYD for trade secret theft. It facilitates classroom discussion on the boundary between trade secret theft and learning by hiring, and on factors that contribute to haemorrhaging of talents to competitors. Discussion may also focus on the importance of proper information system management in protecting trade secrets, and appropriate litigation
Penelope Chan prepared this teaching note under the supervision of Professor Zhigang Tao, Professor Shang-Jin Wei, Dr. Yahong Li and Dr. Jiangyong Lu as a guideline to teaching: “Foxconn V BYD (A): Commercial Espionage or Learning by Hiring?”. © 2009 by The Asia Case Research Centre, The University of Hong
References: Song, J., Almeida, P. and Wu, G. (April 2003) “Learning-by-Hiring: When Is Mobility More Likely to Facilitate Interfirm Knowledge Transfer?”, Management Science, 49 (4), pp. 351– 365. 5 6 Wu, D. (16 July 2008) “Taiwan Manufacturer Wants Chinese Rights”, Associated Press. Surface Mount Technology is a method used for constructing electronic circuits in which the components are mounted directly onto the surface of printed circuit boards. 7