Importance of Emotional Intelligence as an Entrepreneur

An analysis of the data from over 65,000 business owners points to the importance of emotional intelligence in entrepreneurship.

A study which was published in the Strategic Entrepreneurship Journal found that emotional intelligence is a stronger predictor of entrepreneurial success than general mental ability.

General mental ability refers to the cognitive skills necessary for higher-order thinking, such as reasoning and problem-solving. Emotional intelligence, by contrast, describes the ability to recognize, understand, and effectively manage one’s emotions.

While general mental ability has been found to be most important for success in workplace settings, emotional intelligence should be more important for success in entrepreneurship according to the study conducted.

They reasoned that given the uncertain context, social demands, and emotional challenges involved in starting a business, emotional intelligence should be particularly beneficial in this setting.

“I was an entrepreneur for over 10 years and had many friends that were very successful entrepreneurs, yet were not the brightest individuals. Instead, they had great social skills and the ability to manage their emotions and mindset during the inevitable difficulties that arise while building a venture. That is, they had high emotional intelligence,” - Professor at Texas Tech University.

Cognitive intelligence is the number one predictor of performance in traditional work settings, yet, according to the study, this would not be the case in entrepreneurial settings.

To test this theory, the study authors conducted a meta-analysis of 40 existing studies that were conducted among business owners and that included data on either general mental ability and/or emotional intelligence. The analysis included data from a total of 65,826 entrepreneurs.

Since the success of a new business can be conceived of in different ways, the researchers coded success according to several sub-dimensions. These included financial success, firm growth, firm size, and subjective success.

When analyzing the data, the researchers found that both general mental ability and emotional intelligence were positively tied to entrepreneurial success. However — as they had predicted — emotional intelligence was a far stronger predictor of success than mental ability. While emotional intelligence explained 89.1% of the variance in entrepreneurial success, mental ability explained only 10.9%.

Even when controlling for the type of success (e.g., financial success, firm growth), emotional intelligence remained a stronger predictor of success than mental ability. Neither firm size nor the age of the firm was found to moderate the relationships of either mental intelligence or emotional intelligence on success.

“While our study shows that emotional intelligence is more important for entrepreneurial success compared to cognitive intelligence, we were not able to test possible interactive effects between the two, it is possible that cognitive intelligence has a stronger relationship to entrepreneurial success when emotional intelligence is high. Individuals with high levels of cognitive resources perform better when experiencing less stress, suggesting emotional intelligence could aid in the utilization of high cognitive ability.” - Researchers

The context of entrepreneurship differs from typical workplace settings in ways that might explain their findings. Building business relationships, dealing with unexpected losses, and remaining motivated through ups and downs are everyday realities for entrepreneurs, and these are all skills that require emotional intelligence. Indeed, studies suggest that people high in emotional intelligence are better at forming positive relationships with others, more resilient in the face of stress, and more self-motivated.

The study highlights the fact that entrepreneurship is truly a unique work setting that favors those who can manage themselves and others effectively. The promise of entrepreneurship is that it provides a setting for people to chart their own direction in life through the development of a venture. This development requires the ability to work through one’s own emotions and to influence others.

The study authors note that emotional intelligence can be learned, suggesting that people aspiring to start a business might benefit from participating in emotional skills training. These trainings could focus on skills like networking with other businesses and navigating unpredictable circumstances.

The primary practical implication concerns the ability to develop the knowledge and skills necessary for entrepreneurial success. Prior research has shown emotional intelligence to be highly trainable in individuals. This suggests that individuals that seek to develop their emotional intelligence might also be able to develop related skills for entrepreneurial success.

For example, skills such as building business networks, creativity and opportunity recognition, becoming more coachable, and enacting adaptive responses to unpredictable events, could be developed in aspiring entrepreneurs. Also, while our results suggest the impact of general mental ability on entrepreneurial success is small compared to the effects of emotional intelligence, entrepreneurial success is still affected by the general mental ability.

Learning is a critical component of entrepreneurial success, and high general mental ability individuals learn more from a given amount or type of experience. Given the fact that entrepreneurs often run out of financial resources before they can reach profitability, time is usually a luxury not enjoyed by entrepreneurs. This suggests that low general mental ability individuals might be at a serious disadvantage when time is a salient factor.

The study discussed in the article above, “What matters more for entrepreneurship success? A meta-analysis comparing general mental ability and emotional intelligence in entrepreneurial settings”, was authored by Jared S. Allen, Regan M. Stevenson, Ernest H. O’Boyle, and Scott Seibert.