New research shows that in the U.S., many states have been experimenting with different forms of marijuana legalization. The study found that businesses are thriving in states where marijuana is legal.
Researchers at the University of Iowa embarked on a study of the impact of legalization on the economy, and they analyzed 9,810 corporations between 1991 and 2017. The researchers found that after the legalization of medical marijuana, the states experienced a multitude of positive impacts.
The authors of the research said that firms whose headquarters are in a state where marijuana is legal were found to receive higher market valuations. The companies also earned higher and sometimes abnormal stock returns, employee productivity improved, and innovation also increased.
The study, which is yet to be published, shows that having marijuana laws helps unleash the untapped potential of employees as well as attract new talent for the companies.
The research authors also wrote that after marijuana was legalized, companies became more productive because they were able to hire more productive employees from other states.
The study also found that after medical marijuana laws were passed, companies earned a higher net income per employee, and this gain was consistent over the next two years.
The study reveals that the company value increased by 4.2%, which is equivalent to an average increase in the market value of corporations by $166 million, after the enactment of medical marijuana laws.
A positive shock to the human capital after legalization leads to an increase in profitability in firms based in states where marijuana is legal, according to the study authors.
The study found that the stock prices of companies located in jurisdictions where marijuana is legal fared better than those located in states where marijuana is illegal. Besides, firms in medical marijuana states experienced 4.56% increase in their stock value, whereas corporations in jurisdictions where there are no medical marijuana programs showed a loss of about 2% annually.
The research authors suggested that after marijuana laws are approved, companies innovate to ensure that they become more profitable in the wake of the new sector that is likely compete with them for employees and other resources, while their counterparts in regions where cannabis is illegal don’t have that added need to get creative.
The study concludes that not only do companies apply for more patents and receive citations on the said patents after marijuana legalization, but they are also more productive and efficient in generating innovation output from labor and research. There is also an increase in business startups and venture capital financing in jurisdictions that legalize cannabis.
The study also investigated the innovation and productivity of people working, living, and migrating to states where marijuana is legal. And, the authors found that the creativity of the scientists was enhanced after legalization. Compared to before the enactment of medical marijuana laws, the study found that more scientists moved to other states after the passage of medical marijuana legalization.
The study concluded that companies within states where marijuana is legal were able to attract more productive inventors and also saw an uptick in innovation among their employees as a result of the passage of enabling marijuana laws.
Industry watchers believe that not even the well-established marijuana companies like ChineseInvestors.com Inc. (OTCQB: CIIX) would have imagined that legalizing marijuana would have an all-round beneficial effect on profitability and productivity in sectors outside the cannabis industry, but this study proves that this is true.
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