;This two-year project investigates how customer-side information systems shape suppliers’ relationship-specific investments (RSIs), such as customized R&D, dedicated capacity, and tailored assets, under incomplete contracting. It suggests that two types of governance signals can help ease suppliers concerns about hold-up risks from major customers: (i) accounting comparability with industry peers for enhanced interpretability of financial reports for benchmarking and risk assessment; and (ii) strong ESG performance for increased credibility, governance discipline, and long-term focus. Using U.S. public-firm supply-chain links in Year 1 and Taiwanese R&D intense listed-firm data in Year 2, the project tests whether higher comparability and stronger ESG increase both the level and efficiency of suppliers’ RSIs, especially when information frictions and customer dependence are high. The anticipated societal benefits include improved financial and sustainability reporting standards that promote genuine transparency (deterring symbolic compliance), and building trust amongst firms and stakeholders. Economically, better reporting should result in more efficient interfirm capital allocation and greater resilience within production networks, extending the influence of as reporting quality beyond capital markets into decision-making for improved innovation and capacity. For industrial development, the findings offer practical guidance for customers and regulators to strengthen supply-chain collaboration and help upstream firms commit to productive specialization despite uncertainty.
