Understanding the Effects of Decision-Making Logics on Small Business Relative Profitability

This study examines the decision-making logics of 220 small and micro-entrepreneurial businesses throughout the United States and presents a model for a better understanding of the impact of decision-making approaches on relative profitability through the lens of effectuation theory in the small business and entrepreneurial context. The study fills existing gaps in literature by accounting for the moderating influences of the decision-maker’s emotions (affect) as well as accounting for entrepreneurial orientation. The study finds that effectuation is positively related to small business relative profitability. Entrepreneurial orientation as well as positive and negative owner / manager affect are shown to moderate the relationship between either decision-making logic and firm relative profitability.