Entrepreneurial Mental Health and Venture Performance—An Empirical Study Based on Strategic Leadership Theory

As China continues its rapid economic transformation and moves toward innovation-driven development, the mental health of entrepreneurs has become an increasingly important yet insufficiently examined factor influencing business success.In a context where entrepreneurial competition is intensifying and strategic decision-making is more complex, gaining a deeper understanding of how mental health affects entrepreneurial effectiveness is essential.Based on strategic leadership theory, this study constructs an integrated conceptual framework to investigate the role of mental health in shaping venture performance, with innovation behavior serving as a mediating mechanism and resource slack functioning as a moderating contextual factor. To empirically examine these theoretical relationships, the study employs a dual-dataset strategy.The first dataset is derived from a comprehensive provincial-level survey conducted in Shandong Province, offering detailed insights into entrepreneurial dynamics within a major economic region of China.The second dataset is sourced from the nationally representative China Family Panel Studies (CFPS), which ensures broader generalizability and external validity across different regions and demographic groups in the country. The empirical analysis leads to three major findings.First, entrepreneurial mental health has a significantly positive effect on venture performance.Entrepreneurs who report higher levels of mental health tend to demonstrate clearer strategic thinking, greater market sensitivity, and more consistent decision-making.These mental health advantages translate into stronger leadership performance, more effective stakeholder engagement, and greater organizational responsiveness to external changes.The cumulative impact of these factors contributes to improved business outcomes across multiple dimensions. Second, the study identifies a counterintuitive moderating role of resource slack.Although prior literature often suggests that resource abundance strengthens organizational performance, the findings of this research indicate the opposite in the context of mental health.Specifically, when firms possess surplus resources beyond their immediate operational needs, the positive relationship between entrepreneurial mental health and venture performance is significantly weakened.This may be due to reduced pressure to act strategically, diminished urgency for innovation, or lower sensitivity to environmental threats, which together can offset the benefits that mental health would otherwise generate. 〖KH-+3.5mm〗 Third, innovation behavior functions as a partial mediator in the relationship between mental health and performance, but this mediation effect is context-dependent.While the direct association between mental health and innovative behavior is not statistically significant, further analysis using bootstrap methods confirms a significant indirect effect.This suggests that mental health can influence innovation outcomes, but only when certain organizational or environmental conditions are present to support innovative action.Moreover, resource slack also moderates this indirect pathway, with the mediating role of innovative behavior becoming less effective as resource slack increases.This multilevel interaction reveals the complexity of how mental health, organizational behavior, and contextual factors jointly shape performance outcomes. This study offers several important theoretical contributions.First, it extends strategic leadership theory by incorporating mental health into its framework within the entrepreneurial context.Traditional research in this domain has focused largely on leadership behaviors and organizational strategy, often overlooking the psychological characteristics of the entrepreneur.By demonstrating that mental health is a fundamental component of entrepreneurial human capital—shaping innovation behavior and performance—the study introduces a more comprehensive understanding of individual-level leadership traits. Second, the findings challenge the linear assumption that positive psychological traits automatically translate into strategic action.The results show that the effect of mental health on innovation behavior depends heavily on contextual conditions, particularly the level of resource slack.Mental health significantly drives innovation when resources are constrained or moderately available, but this effect diminishes under high resource slack.This context-dependent mechanism not only enriches the theoretical understanding of how individual traits interact with organizational conditions but also offers a more dynamic interpretation of strategic leadership in entrepreneurial settings. Third, the study contributes to the resource-based view (RBV) of the firm by highlighting a potential downside of excessive resource availability.While entrepreneurship policy in China has traditionally focused on increasing resource support—through subsidies, tax incentives, and incubator platforms—this research reveals that such overprotection may lead to policy dependency and strategic inertia.This so-called “greenhouse effect” reduces sensitivity to market opportunities and weakens the motivational role of mental health in driving innovation.In contrast, moderate resource constraints appear to sharpen entrepreneurs' strategic focus and enhance the performance-enhancing effects of good mental health.This insight provides important refinements to RBV by suggesting that intangible psychological resources such as mental health require carefully balanced organizational environments to generate their full strategic value. Taken together, these findings carry valuable practical implications.They underscore the need to incorporate mental health as a core component in entrepreneurship support systems, particularly in high-risk, high-pressure environments.Policymakers should promote mental health services tailored to entrepreneurial challenges, while also designing resource allocation strategies that avoid excessive buffering.By fostering both internal resilience and external discipline, such interventions can help maximize the strategic and economic value of entrepreneurial mental health in China's evolving economic landscape