The utilisation of information technology to facilitate “smartness” is considered as a promising approach to improve the rural economy. However, the explanation of how the adoption of smartness in rural areas can lead to an improvement in the citizen’s economic welfare is still lacking in current studies. This paper aims to formulate a theoretical model that explains the causal mechanism of smartness adoption in rural areas to contribute to the improvement of rural citizen’s economic welfare. To achieve this, we conducted a systematic literature review based on three research questions resulting in 119 selected articles, which we used to formulate a theoretical model. The proposed model posits that rural smartness has a mediating effect on the citizen’s economic welfare through its positive impact on the competitiveness and innovativeness of rural business entities. Additionally, the proposed theoretical model highlights the necessity of adopting a smart service platform, representing the IT artefact for smartness. We argue that the adoption of such a platform would have a significant moderating effect on the competitiveness and innovativeness of rural business entities. We also contribute a comprehensive set of candidate measures we extracted from the selected literature as operationalisation of the proposed model. In terms of contribution to practice, the proposed theoretical model can be used as the starting point to guide the diffusion of smartness in rural areas.