Dazed and Confused: Reconsidering the Relationship Between Drug Testing and Firm Performance

Abstract

As the United States nears its 50th anniversary in the War on Drugs, societal attitudes toward substance use have changed drastically, especially with respect to the substance most commonly tested for in the workplace: marijuana. Despite the changing tide of attitudes toward substance use, about half of medium and large corporations still test employees for drugs as part of employment screening, ongoing employee management, or both. Moreover, despite the prevalence of workplace drug testing, little research has investigated how drug testing relates to firm performance. In this work, we draw from the behavioral theory of the firm and to predict that drug testing is a perceived violation of employee’s rights and privacy, and that these violations affect employee attitudes and, subsequently, employee performance. Moreover, we argue that drug testing represents a disregard on the part of management for the rights and privacy of employees, which in turn informs how employees interact with other stakeholder groups, negatively affecting firm social performance. Findings reveal that organizations utilizing drug testing regimes do indeed experience decreases in financial performance and tend to have more extreme outcomes on social performance dimensions, with both positive and negative dimensions of social performance increasing or decreasing simultaneously.