Yes, but I see no proof that the Peter Principle is any more prevalent in up-or-out organizations than in other types of organizations. PP occurs in every large company.
Up-or-out is supposed to prevent the Peter Principle.
When the PP is active, people "rise to the level of their incompetence", and then stay there indefinitely. In Up-or-out, if you stop rising, then (after some suitable attempts to help you get unstuck) the company starts encouraging you to leave (with increasing vigour). They get the benefit of your knowledge at every level that you can operate at.
