Study: Entrepreneurs May Benefit More from Emotional Intelligence

BLOOMINGTON, Ind. – A study by professors and Indiana University’s Kelley School of Business shows that emotional intelligence may play a crucial role in the survival of a businesses.

“We found that entrepreneurs benefit much more from emotional competences than other competencies — such as IQ — due to high uncertainty and ambiguity that comes with the world of entrepreneurship and even more applicable in a crisis,” said Regan Stevenson, professor of entrepreneurship and management. “Being an entrepreneur is not a ‘traditional workplace setting.’ If you are an entrepreneur, you know that managing your business can often feel like you are screaming alone on an emotional rollercoaster.”

And over the course of the past year, those emotions have likely been amplified as the country worked its way through a pandemic, mass protests and reckonings over racial inequities, a presidential election and more. 

Data from the U.S. Bureau of Labor Statistics shows about 20% of businesses fail within their first five years. In 2020 alone, more than 1 million companies with multiple employees closed. The number of bankruptcies filed in 2020 and 2021 are expected to approach the same level as the worst point of the Great Recession.

“The extreme nature of the pandemic has made one’s ability to manage emotions and social connections critically more important, especially so during these times of major disruption and crisis,” said Ernest O’Boyle, professor of management and entrepreneurship.

Previous research suggested cognitive intelligence was a better indicator of success among entrepreneurs, but the two forms of intelligence have rarely been studied together. O’Boyle and Stevenson’s research found those with higher emotional intelligence were better at self-motivation and social skills.

“While IQ is unquestionably the better predictor of job performance and career success across all jobs and careers, within the domain of entrepreneurship, emotional intelligence was the stronger predictor of success,” O’Boyle said. “Those with high emotional intelligence tended to be more successful as business leaders and enjoy success than in more typical jobs and careers.”

For their study, the professors examined 40 previous studies that looked at nearly 66,000 entrepreneurs. Their paper, “What matters more for entrepreneurship success? A meta-analysis comparing general mental ability and emotional intelligence in entrepreneurial settings,” appears in Strategic Entrepreneurship Journal.

Other authors are Jared Allen, a doctoral student at the University of Central Florida and the corresponding author; and Scott Seibert, professor and chair of human resource management at the Rutgers University School of Management and Labor Relations.

Source: Indiana University Kelley School of Business

Published by The Business Journal, Youngstown, Ohio.