Impact of cultural intelligence on SME performance

Purpose: In environments characterized by high cultural diversity, the ability to understand the cultural makeup of the workforce and the environment would equip business owners with knowledge required to innovate, take risks and proactively change their business offerings. Drawing on the upper echelons theory and action-characteristics model of entrepreneurship, the purpose of this paper is to test how competencies of small business owners, namely, cultural intelligence (CQ) and entrepreneurial orientation (EO) contribute to the performance of their firms. Design/methodology/approach: Using a sample of 106 small and medium enterprises (SMEs) from the UAE, the data were collected through structured questionnaires and analyzed using partial least squares–structural equations modeling. Findings: Results showed that CQ of the SME owner has a positive effect on firm performance (FP) through the mediating role of EO. Also, CQ of the SME owner was found to have a direct effect on FP, thus asserting its importance as a valuable competency that SME owners need to cultivate when operating in a multicultural environment. Practical implications: Skills of the top managers greatly influence the choices and decisions they make, which in turn impact the effectiveness of their organizations. This study focuses on the role of managerial competencies that need to be cultivated among SME owners that would contribute to the growth of their firms. Originality/value: This research studies the role of an individual’s cross-cultural and entrepreneurial competencies that enable the organization to achieve higher performance.