Entrepreneurial alertness refers to the ability to process information and signals from the environment so that individuals can recognize business opportunities, whereas innovation modes depict the variation in firms’ approaches to innovation. Innovation modes have important implications in the way firms compete; however, little research has been done about the relationship among entrepreneurial alertness, innovation modes, and business model in firms. This study explores whether entrepreneurial alertness dimensions influence business models through their effect on firms’ innovation modes. Using survey data from analysis of 119 manufacturing small and medium-sized enterprises in Mexico using structural equation modelling, this study shows that entrepreneurs’ entrepreneurial alertness dimensions have different impacts on innovation modes, which thus have different effects on the efficiency and novelty of business models.