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Emotional smarts benefit entrepreneurs more than IQ

Emotional intelligence may be far more important for entrepreneurs than previously thought, researchers report.

George Vlahakis-Indiana • futurity
Feb. 2, 2021 5 minSource

Emotional intelligence may be more vital to a business’ survival than previously thought, according to new research.

Emotional intelligence is the ability to understand, use, and manage emotions to relieve stress.

“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,” says Regan Stevenson, assistant professor of entrepreneurship and management and a faculty fellow in entrepreneurship at the Indiana University Kelley School of Business.

“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,” Stevenson adds.

According to recent US Bureau of Labor Statistics, about a fifth of all new businesses fail within their first two years and nearly half are shuttered within five years. More than a million US companies with employees were shuttered in 2020, in large part due to the COVID-19 pandemic. The number of bankruptcies in 2020 and those expected this year likely will approach levels last seen during the worst quarter of the 2008-09 financial crisis.

“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,” says Ernest O’Boyle, associate professor of management and entrepreneurship and the chair in management.

The research found that those with a higher emotional intelligence are better able to be self-motivated and have higher social skills—even under more normal circumstances.

“Emotional Intelligence is linked to social skills such as accurately perceiving other’s needs, making good first impressions, and influencing others in interpersonal interactions. These skills are important for developing business networks, which can aid in signaling legitimacy and in acquiring resources,” the researchers write.

“These skills can enhance creativity and opportunity recognition; aid decision making in emotionally turbulent situations; and enable adaptive responses to unpredictable events.”

Previous research has suggested that cognitive intelligence was a greater predictor of success among entrepreneurs. The two factors are seldom studied together.

“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 adds. “Those with high emotional intelligence tended to be more successful as business leaders and enjoy success than in more typical jobs and careers.”

Their findings are based on an empirical study of nearly 40 previous studies and a meta-analysis of 65,826 entrepreneurs observed through that research.

The paper appears in Strategic Entrepreneurship Journal .

Additional authors are from the University of Central Florida and the Rutgers University School of Management and Labor Relations.

Source: Indiana University

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