Co-Opt or Coexist? A Study of Medical Cannabis Dispensaries’ Identity-Based Responses to Recreational-Use Legalization in Colorado and Washington

Abstract

When recreational cannabis dispensaries first entered the U.S. market in 2014, how did incumbent medical cannabis dispensaries react? Did they emphasize their distinct identity as medical providers, distancing themselves from recreational dispensaries and those consumers who consume cannabis recreationally? Or did they downplay their medical orientation to compete directly for potential resources? In this study, we propose that how incumbent organizations position their identities in response to increasing competition from an emerging rival form depends on key audiences’ acceptance of the new form. Using data on the evolving cannabis markets in the states of Colorado and Washington during the year following the initial emergence of the recreational category, we find a sharpening of identity among medical dispensaries in communities with low voter support for recreational-use legalization. Medical dispensaries accentuated the medical orientation of their identities as recreational dispensaries increasingly set up operations and as buyers inclined more toward recreational use. In contrast, we find a blurring of medical/recreational identity in communities where voters demonstrated support for recreational-use legalization in the state-level ballot. Overall, the theoretical framework we advance integrates cultural and strategic approaches by explicitly considering conflict in different audiences’ beliefs about the legitimacy of products and its implications for market producers seeking to connect with and appeal to current/potential consumers.The online appendix is available at https://doi.org/10.1287/orsc.2017.1167