A new research has suggested that practical intelligence is the key to achieving entrepreneurial success.
Barbara J. Bird at American University's Kogod School of Business, and J. Robert Baum at the University of Maryland define practical intelligence as common sense, know how, or street sense - best described in layman's terms as "learning by doing."
"Entrepreneurs-especially during the early stages of their start-ups-have to think on their feet. They have to make the best decisions possible in the least amount of time and usually with few resources. They don't have time for in-depth analysis and usually do not have the luxury of consulting with others. They need to act. Practical intelligence empowers them to act quickly and confidently," said Bird.
Bird and Baum collected questionnaire responses from 283 founders of early stage printing and graphics businesses and found that the entrepreneurs who were most likely to run rapidly growing ventures honed their practical intelligence by pursuing specific growth goals, among other things.
Those asked to complete the questionnaire had 5 full time employees and had founded their companies during the past four years-the typical cut off for empirical studies of new ventures in venture capital, private equity, and entrepreneurship research.
"Our research may better help entrepreneurs understand the value of hands-on experiences and experimentation or trouble shooting in the field," Bird said.
While practical intelligence offers the "know how" to launch and grow a new venture, growth goals are equally important as they provide the motivation by focusing the know how on specific outcomes.
Teachers can look for ways to help students improve their practical intelligence, and for new venture funding as financiers may want to encourage learning orientations that improve entrepreneurs' practical intelligence.
The research is to be published in a forthcoming issue of the journal Personnel Psychology.