Practical intelligence, or common sense, is key to success in business, according to a new study that highlights the importance of hands-on experience and learning by doing.
Researchers from American University in Washington D.C. and the University of Maryland found that entrepreneurs who learn from experience and experiment have an edge over those who acquire knowledge through reading and observation.
"Entrepreneurs, especially during the early stages of their start-ups, have to think on their feet," said Professor Barbara Bird, of American University's Kogod School of Business, whose findings will be published in the Personnel Psychology journal.
"They have to make the best decisions possible in the least amount of time. They need to act. Practical intelligence empowers them to act quickly and confidently."
In their study, Ms. Bird and her team focused on the printing and graphics industry because it includes new companies as well as already established ones.
To compare levels of practical intelligence, the researchers asked 283 entrepreneurs to rank 10 types of decisions in order of importance in specific business scenarios. They then compared the answers to responses from 22 established CEOs in the printing industry who had started their own businesses.
The answers showed that the entrepreneurs who were most likely to run rapidly growing ventures had relevant experience in printing and graphics, learned through hands-on experiences and experimentation. They also honed their practical intelligence by pursuing specific growth goals.
Although the researchers focused on one industry, Ms. Bird said practical intelligence is of universal importance for business success.
She added that Microsoft's Bill Gates and Steve Jobs of Apple are prime examples of people who have displayed practical intelligence in achieving their entrepreneurial goals.
"One notion of practical intelligence is expertise. Bill Gates is an expert coder, which moulded his approach to software. Steven Jobs is an expert in design. Practical intelligence can be applied to any field," she explained.
"Teachers and mentors involved in development should say 'go do it', and tell their students to go practice their craft, and make mistakes," she said.
Ms. Bird added that many entrepreneurs say that they don't fail. They make mistakes which gives them practicable knowledge that they can use.