Will major customers push suppliers to improve their internal information quality?

This paper investigates how major customers impact suppliers’ internal information quality. Using data on U. S. manufacturing firms from 2004 to 2022, we find that suppliers with a more concentrated customer base exhibit better internal information quality. The results are robust to instrumental variable approaches and controls for self-selection bias. Additionally, the positive relationship between customer concentration and suppliers’ internal information quality is more pronounced when customers possess greater bargaining power and stronger monitoring incentives. Furthermore, we find that low-quality internal information from suppliers can negatively affect customers’ future performance.