| Summary: | Purpose: This paper aims to study the effect of knowledge management in formulating competitive strategies for knowledge-based small- and medium-sized enterprises (SMEs) in Malaysia. Design/methodology/approach: A quantitative approach of a survey was carried out on 135 owners and managers of knowledge-based SMEs in Malaysia. Structural equation modeling technique was used to investigate the relationship between knowledge management and competitive strategies. SmartPLS software is used to analyze the quantitative data. Only SMEs which are involved in R&D and innovation were selected to get the right respondents who meet the objective of the study. Findings: The findings show mixed results. Most dimensions of knowledge management have significant relationships to differentiation strategy except for knowledge creation and knowledge acquisition, with only knowledge acquisition showing a significant relationship to cost leadership. Findings reveal that knowledge management has a positive effect on competitive strategies with more inclination toward differentiation strategy, compared to cost leadership strategy which does synchronize with their commitment in research and development and innovation. Research limitations/implications: This study is only focused on knowledge-based SMEs in central Malaysia. Second, the use of a survey approach minimized the flow of information. Practical implications: SMEs do have knowledge management practices but may not be exploiting it well. Mapping knowledge management practices would help SMEs identify their strengths and weaknesses to explore better business opportunities. This proves that SMEs are leveraging their resources through knowledge application, dissemination, storage and protection to be different than their competitors. However, their apparent lack of knowledge in knowledge acquisition and knowledge creation should be addressed accordingly, as it is important for their future continuous sustainability. Originality/value: This paper contributes to the literature of knowledge management relating to competitive strategies in SMEs. The study offers insights on how competitive strategies were formulated through knowledge management. The mixed results reveal a new different outlook of knowledge management relating to competitive strategies.
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