Abstract
Based on the comprehensive model of Gruca and Sudharshan (1995) concerning barriers to entry, this article posits that realized consequences for the incumbent are psychological exit barriers for the CEO and the organization already in the industry. Executive compensation is a key realized consequence for the incumbent CEO and hence a psychological exit barrier for the incumbent CEO. These issues are tested with a sample of incumbent companies with no hypothesized relationship between executive compensation and profitability. Specifically, nine publicly traded HMOs in the health-care industry were analyzed over a 3-year time frame. Because there was a weak relationship between executive compensation and profitability, only weak support was found for the hypothesis concerning executive compensation as a psychological exit barrier. Suggestions for further research are offered to further test the model and explore CEO compensation as a psychological exit barrier. © 2000 John Wiley & Sons, Inc.
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