Businesses Thrive Where Marijuana is Legal: Study

Businesses Thrive MMJ States
Recent research from the University of Iowa indicates that marijuana legalization has numerous positive impacts on businesses, extending beyond those directly involved in the industry. The study, which analyzed 9,910 corporations from 1991 to 2017, found that companies in states where marijuana is legal experienced higher market valuations, improved employee productivity, and increased innovation. It was also reported that firms saw a rise in net income per employee after the passage of medical marijuana laws, leading to an average company value increase of about 4.2 percent. Furthermore, the legalization of marijuana appears to stimulate innovation, with firms applying for more patents and generating more efficient innovation output from labor and research and development input.
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Once thought of as a drug that made individuals sluggish and unmotivated, recent studies are finding that marijuana could be good for businesses. A study conducted by researchers at the University of Iowa has found that legalization has “a multitude of positive effects” on businesses – and not just the ones that are a direct result of the new industry.

Increases In Productivity Translate To Higher Company Value

The study analyzed 9,910 corporations between the years of 1991 and 2017. Researchers found that firms that were headquartered in states where marijuana was legal received higher market valuations, improved employee productivity, and increased innovation.

Considering stigma surrounding the plant suggests that marijuana promotes laziness, this is yet another confirmation that public perception is not always the truth. Cannabis legalization also attracts many people to the state – which in turn provides a whole new pool of talent for businesses to hire.

Researchers reported that “firms earn higher net income per employee” after medical marijuana laws are passed. Overall, this leads to a company value increase of roughly 4.2 percent – or an average increase of $166 million.

According to the study:

Firms experience an increase in profitability likely due to the positive shock to the human capital post-legalization.

Marijuana Legalization Is Good For Business

Not only are businesses more productive and seeing higher profits after legalization, they are also seeing a spike in innovation. Authors of the study suggest that it is these creative new approaches, along with increased productivity, that leads to the overall increase in monetary value for the company:

Our results imply that after marijuana legalization, firms not only apply for more patents and receive more citations on those patents, but also are more productive and efficient in generation innovation output from labor and [research and development] input.

The researchers believe that some inventors already live in the state pre-legalization, but become more creative after medical marijuana is legalized. They also believe that many inventors end up moving to states where medical marijuana is legal.

This makes sense as one thing cannabis users have been saying for generations is that it boosts creativity. The reasoning of the authors of this study certainly makes sense when you consider that fact.

Could A Creative Boost Be Impacting Innovation After Legalization?

What this study boils down to is the fact that marijuana legalization has positive effects on the economy outside of the cannabis industry. After legalization, many businesses have seen huge profits and more innovation than in the years before. There are more thriving corporations in states where the plant is legal than in places where it is not.

Updated: July 27, 2023

Article Written By:

Julia Granowicz

Julia is a professional writer specializing in medical cannabis and alternative health reporting.


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