Amidst the digital economy, generative artificial intelligence (GenAI), with its robust technological capabilities, is profoundly reshaping business model innovation and transformation. Drawing on the techno-economic paradigm, this study develops a conceptual framework to analyze the mechanisms by which GenAI drives this innovation. The empirical analysis employs multiple regression analyses on a comprehensive dataset, which includes China’s specialized and sophisticated enterprises from the SME Board, as well as complementary industry-level, technological, and macroeconomic data. It identifies three core theoretical drivers(1) technological empowerment, reconfiguring business architectures via breakthroughs in underlying technologies, leaps in tool paradigms, and infrastructure infusion; (2) value reconfiguration, multiplying data value, enhancing service precision, and transforming cost structures; and (3) organizational transformation, evolving functional systems, boosting decision efficiency, and expanding ecosystem boundaries. Furthermore, this study delineates how GenAI influences business model innovation along four dimensionscost, efficiency, boundary, and experience. This study illuminates the nexus between GenAI and business model innovation, offering a theoretical basis for managerial practice and proposing a new agenda for academic inquiry.