Small- and medium-size enterprises (SMEs) innovativeness to use e-commerce has received significant research attention. This chapter continues with this tradition and offers a theoretically grounded and deeper insight into the e-commerce innovation process in SMEs. This is achieved by proposing a motivation ability-based four-state developmental framework. Each of the four states is then described in terms of organisational readiness, organisational capability, e-commerce capability, e-commerce motivational factors, and commodity chain position. SME mangers can use the framework as a decision making tool to critically stock-take their innate state and to set realistic goals and expectations with regards to future e-commerce investments. The utility of the framework is demonstrated through case studies of 14 small-scale enterprises located in the Indian state of Karnataka. The result suggests that rather than static models of e-commerce adoption, temporal models that are dynamic in nature and that recognise e-commerce as an ongoing innovation process have more explanatory power to understand innovation in SMEs in such an environment.