THE IMPACT OF EMOTIONAL INTELLIGENCE ON THE BUSINESS PERFORMANCE OF SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs)

This study investigates the impact of emotional intelligence (EI) on the business performance (BP) of small and medium-sized enterprises (SMEs), with a particular focus on the mediating roles of employee engagement (EE) and innovation capability (IC). In the context of increasing market competition and resource constraints faced by SMEs, intangible assets such as emotional intelligence have emerged as critical drivers of organizational effectiveness. A quantitative research design was employed, and data were collected from 356 managers and employees working in SMEs in Ho Chi Minh City, Vietnam. The study utilizes Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the proposed hypotheses and examine both direct and indirect relationships among the constructs. The results reveal that emotional intelligence has a significant positive impact on business performance, both directly and indirectly. Specifically, EI positively influences employee engagement and innovation capability, which in turn contribute to improved organizational performance. The mediation analysis indicates that EE and IC partially mediate the relationship between EI and BP, highlighting the importance of internal organizational mechanisms in translating emotional competencies into performance outcomes. These findings contribute to the existing literature by providing empirical evidence on the strategic role of emotional intelligence in SMEs and by integrating behavioral and innovation perspectives into a unified analytical framework. From a practical standpoint, the study suggests that SMEs should prioritize the development of emotional intelligence through recruitment, training, and leadership development initiatives to enhance competitiveness and long-term sustainability.