Decision-Making Logic and Relative Profitability: The Moderating Roles of Entrepreneurial Orientation and Affect

This study examines the decision-making logics of 220 small businesses in the United States and presents a model for better understanding the impact of decision-making approaches on relative profitability through the lens of effectuation theory. We fill existing gaps in literature by examining the moderating influences of the decision-maker’s affect as well as accounting for entrepreneurial orientation (“EO”). We find that effectuation enhances small business relative profitability. We also find that entrepreneurial orientation, positive affect, and negative affect strengthen the relationship between effectuation and relative profitability.