In an attempt to increase performance and competitiveness. Small and Medium Enterprise (SMEs) requires individual and organizational knowledge. In order to disseminate individual knowledge in the organization. it is needed knowledge transfer in SMEs which facilitated by the knowledge conversition. Knowledge that will be convered in SMEs is the knowledge about the products, manufacture of products, sales, and marketing. This research adapted the approach of IS Research Framework from Hevner to build the knowledge conversion conceptual model. Hypotheses used in this research was Balinese culture influences knowledge conversion in Bali handicraft SMEs. The conceptual model resulted from this research consist of two construcs, Balinese culture and knowledge conversion. The model was evaluated using structural Equation Modeling (SEM) and found that Balinese culture is an influence factor of the knowledge conversion in Bali handicraft SMEs.