The Returns to Physical Capital in Knowledge Production: Evidence from Lab Disasters

108 Pages Posted: 30 Aug 2021 Last revised: 1 Sep 2021

See all articles by Stefano Baruffaldi

Stefano Baruffaldi

University of Bath; Max Planck Institute for Innovation and Competition

Fabian Gaessler

Max Planck Institute for Innovation and Competition

Date Written: August 29, 2021

Abstract

We establish the importance of physical capital in knowledge production. To this end, we exploit adverse events (explosions, fires, floods, etc.) at research institutions as exogenous physical capital shocks. Scientists experience a substantial and persistent reduction in research output if they lose specialized physical capital, that is, equipment and material they created over time for a particular research purpose. In contrast, they quickly recover if they only lose generic physical capital. Affected scientists in older laboratories, which presumably lose more obsolete physical capital, are more likely to change their direction of research and recover in scientific productivity. These findings suggest that a scientist's investments into their own physical capital yield lasting returns but also create path dependence in relation to research direction.

Keywords: adverse events, equipment, laboratories, research, science

JEL Classification: O31, O33, O34

Suggested Citation

Baruffaldi, Stefano and Gaessler, Fabian, The Returns to Physical Capital in Knowledge Production: Evidence from Lab Disasters (August 29, 2021). Max Planck Institute for Innovation & Competition Research Paper No. 21-19, Available at SSRN: https://ssrn.com/abstract=3912401 or http://dx.doi.org/10.2139/ssrn.3912401

Stefano Baruffaldi (Contact Author)

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

Fabian Gaessler

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, 80539
Germany

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