Nov 1

General Intelligence Is Not Enough

High Level of Practical Intelligence is an Important Ingredient for Entrepreneurial Success

Science Daily reports a study showing that General intelligence is not enough. Practical intelligence can mean the difference between entrepreneurial success or failure.

Psychologists have identified multiple kinds of intelligence, but a University of Maryland researcher’s study has found one–practical intelligence–to be an indicator of likely entrepreneurial success.

J. Robert Baum, Director of Entrepreneurship Research at the University of Maryland, defines practical intelligence as “an experience based accumulation of skills and explicit knowledge as well as the ability to apply that knowledge to solve every day problems,” he said. In other words, practical intelligence can be referred to as “know-how” or common sense. 

Learning orientation has an impact on entrepreneurship success. Some people learn little from their experiences and therefore don’t acquire the practical intelligence necessary to begin a successful business venture, said Baum. Practical intelligence is the result of an experimental hands-on operating style that leads to specific learning. “Those with high practical intelligence tend to develop useful knowledge by doing and learning, not by watching or reading,” he said. 

People with strong general intelligence sometimes fail at business. Conversely, there are plenty of examples of those with comparatively lower IQs who are successful in business. Practical intelligence helps explain this surprising phenomenon, says Baum. 

To determine how practical intelligence impacted entrepreneurs’ success, Baum and his fellow researchers, Barbara Jean Bird of American University and Sheetah Singh of the University of Maryland, sought evidence that the interaction of entrepreneurs’ practical intelligence and growth goals led to increased venture success. 

In other words, can practical intelligence explain why some are successful and others are not? Yes, to some degree, it can, he said .In fact, the model of practical intelligence interacting with growth goals successfully predicted venture increase in sales and employment 27 percent of the time.

Comparing responses to a set of business scenarios from founders of newly started businesses and founder/CEO’s of successful and established printing companies, they were able to identify those founders with different levels of practical intelligence. 

“If there was little difference in the comparative answers, the newcomer was considered to have high practical intelligence. A wide variance of answers indicated low practical intelligence,” Baum said.

There are many kinds of intelligence, including emotional, social and creative. Practical intelligence is just one; but a critical one for entrepreneurial success, said Baum. Other factors needed for entrepreneurial success include a demand for the product from customers that will result in a profit, having financial resources, industry experience and a strategic plan that includes specific goals.

Baum also said personal characteristics are important as well in venture creation and growth. 

The study will be published in an upcoming issue of Personnel Psychology.

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