An important step-up in the rate of productivity growth occurred during this period, but not all players in the game were capable of achieving the extra normal rates of return that flowed to some of the more innovative companies.
Young start-up companies that had never made a profit (and never would) attracted copious amounts of financing from venture capitalists and the initial public offering market. Analysts began to question whether established “bricks and mortar” businesses could ever compete with this new Internet business model, and many of these more-traditional firms felt compelled to accelerate their own on-line strategies.