This study conducted a longitudinal empirical analysis using data from 80 small and medium-sized enterprises in the Korean electronic components industry over the period 1995–2004 to dynamically examine the effects of exploitation and exploration on business performance. The analytical results can be summarized as follows. First, although the relationship is weak due to high significance levels, exploitation shows an inverted U-shaped relationship with ROS at t+2. Exploitation had no effect on ROS in the concurrent year or ROS at t+1, and exerted only a weak positive effect on ROS at t+3. Second, exploration was found to have an inverted U-shaped relationship with sales growth rate at t+3. However, exploration exhibited a U-shaped relationship with concurrent-year sales growth rate and a positive relationship with sales growth rate at t+1. Third, the moderation effect of exploitation and exploration manifested negatively only on the concurrent-year sales growth rate in year t when exploitation and exploration were implemented. These results carry the following implications. First, the performance indicators primarily influenced by exploitation and exploration may differ from each other, suggesting their complementarity (O'Reilly & Tushman, 2004; Levinthal & March, 1993). Second, beyond the main effects of exploitation and exploration on business performance, their moderation effect appeared to be short-term and negative, confirming the management issues of exploitation and exploration that have been proposed based on case studies (Tushman & O'Reilly, 1996; Kim & Ha, 2004). Previous researchers have presented empirical findings showing positive moderation effects or proposed the logic that positive fit effects exist only in firms with ambidextrous capabilities (Katila & Ahuja, 2002; He & Wong, 2004; Tushman & O'Reilly, 1996). In summary, this study has significance in partially demonstrating the paradoxical aspects of exploitation and exploration. Although exploitation and exploration have a negative moderation effect in the short term, they are mutually complementary because each is necessary for achieving their respective performance goals of growth and profitability. Finally, the limitations of this study and directions for future research were discussed.