Is Rationality Enough? Exploring the Three-Way Interaction of Decision-Making Rationality, Entrepreneurial Orientation, and Market Turbulence in SMEs

This study investigates whether decision-making rationality(DR) enhances the performance of small and medium-sized enterprises(SMEs) in Korea and examines how entrepreneurial orientation(EO) moderates this relationship, particularly under conditions of market turbulence(MT). Drawing on data from 387 Inno-biz certified SMEs⎯firms officially recognized for their technological competence and growth potential-we employed hierarchical regression analysis to test the proposed three-way interaction model. The findings indicate that decision-making rationality positively affects firm performance, and this relationship is significantly strengthened when firms exhibit high levels of entrepreneurial orientation, underscoring a synergistic effect between rational decision-making and entrepreneurial behavior. Furthermore, the interaction effect becomes more pronounced under high market turbulence, revealing a three-way interaction among DR, EO, and MT. These results contribute to the strategic management and entrepreneurship literature by empirically validating the complementary roles of rational analysis and entrepreneurial orientation in enhancing SME performance, especially in dynamic market environments. The study also offers practical implications for SME managers and policymakers focused on building capabilities that support effective decision-making and opportunity exploitation in resource-constrained settings.