How can firms protect investments made specifically for a key buyer? In many business-to-business supply chain relationships, suppliers customize products, technologies, or processes for particular buyers. While such investments can increase the value of the relationship, they also make suppliers more vulnerable if contracts cannot fully anticipate future contingencies. This is especially true when buyers have many alternative suppliers and can more easily switch.

In our study, we show that suppliers are more likely to share a common director with a buyer when they make buyer-specific innovative investments. This positive relation is stronger when the buyer has a larger pool of alternative suppliers. We further find that when a supplier and buyer share a director, the supplier’s R&D investment is more responsive to the buyer’s growth opportunities, and the relationship lasts longer. These findings suggest that board ties can help firms build credible commitment and support exchange when supply chain relationships rely on specialized investment.

Management insight: In supply chains built on specific assets, shared board connections can be more than symbolic. Shared board ties can help safeguard buyer-specific investments, improve coordination, and strengthen long-term supply chain partnerships.