Small and Medium Enterprises (SMEs) are the backbone of the economy, and they significantly benefit from Knowledge Management (KM) to develop competitiveness throw innovation, however the extant literature has little empirical support for this statement. Dating from the early 1990s, the increased use of technology has brought about numerous changes in the business world, and electronic business (e-business) has become a paramount innovation for business. This technology not only introduced a new way of doing business, but also has become a vital part of peoples’ lives. The purpose of this paper is to develop a research model aimed to explain e-business adoption (EBA) at firm level, from the perspective of the Knowledge Management View (KMV). Using the literature review this paper develops a theoretical construct aimed to explain EBA in SMEs. It initiates with an introduction to the study of KM, then, the relation is analyzed between KM and innovation and deepens into the relation between KM and EBA. Finally, a conceptual framework is constructed and research propositions are developed in order to establish EBA as a dependent variable that can be explained by KM. Although studies on Internet adoption by businesses have proliferated in the last few years, this kind of research has, however, been limited or null in some developing countries like Mexico and only few studies have been developed to explain EBA in SMEs from the perspective of KM. The proposed model is part of a theoretical-empirical research project aimed to explain e-business adoption in Mexican SMEs Past studies have mainly focused on studying EBA from the innovations adoption theory perspective, using variables such as environmental, organization attributes as well as innovation’s attributes. This study addresses the previous scarcity of literature on the relationship between KM processes and EBA. These results have implications for e-business managers in formulating policies and targeting appropriate organisational capabilities to ensure the effective adoption of e-business, nevertheless, the research model needs to be tested empirically to prove its real value.