Barriers to Exit - Definition
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What is a Barrier to Exit?
Barriers to exit are restrictions that make it difficult for a company to make an exit from the industry in case they want to separate or stop operating. The most common barriers to exit involve specialized assets that cannot be sold easily, big exit costs associated with writing off assets, or losing customer goodwill.
Academics research on Barriers to Exit
- Market exit and barriers to exit: Theory and practice, Karakaya, F. (2000). Market exit and barriers to exit: Theory and practice.Psychology & Marketing,17(8), 651-668. This article examines market exit, barriers to exit, modes and strategies of exit, reasons for exit, and the consequences of exit through a literature review of the academic literature and the popular press. There is very little empirical research in this area. The article attempts to analyze the applications of market exit and barriers to exit theories, and consequences of exit with recent examples taken from newspapers and popular business magazines. Despite the fact that there are strong barriers to exit, companies are sometimes forced to exit markets. Marketexit or productelimination decisions influence employees, distributors, suppliers, and customers. This influence is usually negative and is in the form of cognitive dissonance. 2000 John Wiley & Sons, Inc.
- Please note location of nearest exit: Exit barriers and planning, Porter, M. E. (1976). Please note location of nearest exit: Exit barriers and planning.California Management Review,19(2), 21-33.
- Exit barriers and vertical integration, Harrigan, K. R. (1985). Exit barriers and vertical integration.Academy of Management Journal,28(3), 686-697. When exit barriers trap firms in an industry, the result is destructive competition and reduced profits (Harrigan, 1981;Porter, 1976). Mobility barriers often prevent firms from changing their strategic postures so as to serve new customers (Caves & Porter, 1976). For the purposes of this paper, the term exit barriers will refer to both mobility and exit barriers. High barriers of either type are likely to keep firms operating within an industry without changing their strategic posture even when they earn subnormal returns on their investments. Vertical integration, the in-house production of goods and services that could be purchased from outsiders, has been regarded as a major source of exit barriers (Porter, 1980). No one has established the relationship between integration and exit barriers empirically, however, primarily because of an absence of appropriate variables in existing data bases (Caves & Porter, 1976;Harrigan, 1980). Moreover, a precise way of identifying and estimating the dimensions composing vertical strategies was lacking until recently (Harrigan, 1983a). Consequently, only a partial model of the forces that raise exit barriers has been tested. This paper brings together questions concerning exit and mobility barriers with those concerning vertical integration strategies in order to explore whether and when vertical integration constitutes an exit barrier. By identifying how the operative forces interact, it suggests how firms might cope with situations in which vertical integration can raise exit barriers. If firms can lower the height of exit barriers, they can reposition themselves to serve more attractive market segments or to exit with relative ease.
- The effect of exit barriers upon strategic flexibility, Harrigan, K. R. (1980). The effect of exit barriers upon strategic flexibility.Strategic Management Journal,1(2), 165-176. The conceptual construct, exit barriers, is expanded using both statistical findings and the results of field studies. The immobility of resources, it is suggested, can be overcome by helping marginal competitors to exit from potentially volatile businesses. The implementation of such tactics can be adapted to the firm's own strategic commitment and to the nature of the business in question, although it is expected that firms which might consider purchasing the physical and intangible assets of competitors in order to help them to scale high exit barriers, must themselves perceive the business to be of sufficiently high strategic importance to do so.
- Subjective barriers to prevent wandering of cognitively impaired people, Price, J. D., Hermans, D., & Evans, J. G. (2001). Subjective barriers to prevent wandering of cognitively impaired people.Cochrane Database of Systematic Reviews, (1).