Suppliers' relationship-specific investments and customers' management forecasts

In this research, I examine the effect of relationship-specific investments (RSI) made by suppliers on customers' decisions to issue management forecasts. Suppliers' RSI have a low value outside of the customer-supplier relationship. Anticipating that their RSI may provide their customers more bargaining power (i.e., the "hold up " problem), suppliers may be reluctant to make RSI in the first place. To lessen suppliers' hold-up concerns and underinvestment in RSI, customers may issue management forecasts to build reputation and credibility, and establish an image of cooperation and transparency by meeting suppliers' information demands. I find the likelihood of customers' issuing management forecasts is positively associated with suppliers' RSI. I also find that such positive association is less pronounced when suppliers have higher bargaining power, and that customers' management forecasts contribute to longer-term customer-supplier relationships.