Are Public Health Policies Associated with Corporate Innovation? Evidence from U.S. Nonsmoking Laws

Abstract

We use a natural experiment resulting from the staggered adoption of local workplace nonsmoking laws over the past fifty years to examine whether these public health policies also are associated with corporate innovation. We find a positive association between innovation and nonsmoking laws enacted near companies’ headquarters locations, particularly in earlier years when smoking rates were highest. We use multiple difference-in-differences specifications, matched samples, companies headquartered in contiguous counties across state lines, and falsification tests to establish the robustness of the observed association and reduce the likelihood of alternative explanations. We then use an inductive approach to explore multiple potential mechanisms behind this correlation. We find evidence suggestive of the following mechanisms: improved health; improvements to employee creativity, productivity, and absenteeism; and increases in the local employee pool. Other mechanisms likely exist, but the collective evidence suggests that policy-based efforts to improve health are associated with a positive externality - increased corporate innovation.

Keywords: Nonsmoking laws, employee health, innovation, patents, research and development

JEL Classification: G28, G30, G32, G38, I12, I15, I18, J24, M21, O31, O38