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...

This paper uses a new firm panel data set to explore the relationship between R&D and productivity in German manufacturing firms for the period from 1979 to 1989. The results confirm the view that R&D is an important determinant of productivity growth. In the cross-section, the elasticity of...