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We investigate the nature and relevance of physical capital in
knowledge production. Exploiting adverse events in research laboratories,
we find that scientists experience a persistent reduction in
research output if they lose specialized physical capital鈥攅quipment
and material they created over time for a particular research purpose.
In contrast, they recover in productivity if they only lose
generic physical capital. Scientists in older laboratories, who presumably
lose more obsolete physical capital, are more likely to
change their research direction and recover. These findings suggest
that scientists鈥� investments into their own physical capital yield
lasting returns but also create path dependence.
