How cloud computing enables business model innovation for SMEs in retail industry in Sri Lanka

In today's competitive digital economy, small and medium-sized enterprises (SMEs) in the retail sector must continually innovate to remain viable. Cloud computing has emerged as a critical enabler of Business Model Innovation (BMI), offering scalability, flexibility, and affordability that can transform how firms create, deliver, and capture value. However, despite global advances, Sri Lankan retail SMEs continue to lag in cloud adoption due to limited digital readiness, infrastructure, and strategic alignment. This study explores how cloud computing enables BMI among retail SMEs in Sri Lanka through the lens of the Diffusion of Innovations (DOI) theory. Using a quantitative, positivist research design, data were collected from 157 SME respondents and analyzed via Partial Least Squares Structural Equation Modelling (PLS-SEM). The findings revealed that Relative Advantage, Organizational Readiness, Top Management Support, and Government Support significantly influence Cloud Adoption, which in turn has a strong and positive impact on BMI while Compatibility and Trialability were not found to be significant predictors in Sri Lanka. Cloud Adoption also mediated the effects of the key enablers on BMI, confirming its role as the mechanism linking organizational and technological factors to strategic transformation. The study contributes to the theoretical understanding of technology-enabled innovation in emerging economies and provides practical guidance for policymakers and SME managers to accelerate digital transformation.