Do Firms Get High? The Impact of Medical Marijuana Legalization on Firm Performance and Corporate Innovation

Abstract

We find that state-level medical marijuana legalization has a positive financial impact on firms, likely by affecting firms’ human capital. Firms headquartered in marijuana-legalizing states receive higher market valuations, improve employee productivity, and increase innovation. Exploiting inventor mobility data, we directly test the human capital channel and find that states legalizing marijuana are able to retain inventors who become more productive and recruit more innovative talents from out of state.