Kathryn Harrigan

Exit Decisions in Mature Industries

Abstract:
A study of exits from nondeclining industries is used to construct measures of exit barriers and inducements to exit. It is hypothesized that a firm's ability to implement a strategic exit decision successfully depends both on the presence of relatively low industry structure exit barriers, which should permit marginal firms to exit with ease, and on the height of firms' strategic exit barriers, which differ according to how certain firms have competed in the past. Findings from the study of firms in nondeclining industries are contrasted with those from a study of firms in declining industries. Results indicate that the most significant factors that influence exit within mature, nondeclining industries are: 1. presence of excess capacity, and 2. apparent attractiveness of the industry itself. In addition, strategic and economic exit barriers often deter firms from making types of timely and frictionless exits that are assumed possible in economic theories of competition.

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