TY  - JOUR
AU  - Jovanovic,Boyan
TI  - The Pre-Producers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10771
PY  - 2004
Y2  - September 2004
UR  - http://www.nber.org/papers/w10771
L1  - http://www.nber.org/papers/w10771.pdf
N1  - Author contact info:
Boyan Jovanovic
New York University
Department of Economics
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8953
Fax: 212/995-4186
E-Mail: Boyan.Jovanovic@nyu.edu
AB  - Until its sales of a product materialize, a firm is a "pre-producer" in the market for that product. That firm may may be a new start-up, or it may already sell other products. Firms that do not succeed in generating sales eventually become discouraged and move on to other activities. When this fate befalls a lot of firms, as it recently did in several IT-related businesses, the industry experiences a "shakeout." In the model that I will present, during the shakeout some firms switch to flatter, safer earnings. This switch raises earnings at the time of the shakeout but lowers them in the long run, and it therefore raises earnings-price ratios. This has happened on the Nasdaq since March, 2000 when the Nasdaq shakeout began.
ER  -