Knowledge and innovativeness are have been recognized as the main sources of competitive advantages in the economy. Small and medium-sized firms need to increase attention on knowledge management and innovativeness so as to be competitive. The study examined knowledge management, innovativeness and firm competitiveness. The study is conducted on the results based on 252 small and medium manufacturing enterprise managers in Nairobi, Kenya. The data obtained from the questionnaires were analyzed using the SPSS statistical packaged software. The study results showed that knowledge management processes influence innovativeness positively, innovativeness enhances firm competitiveness while innovativeness is a mediator between knowledge management and firm competitiveness. The study demonstrated that knowledge management and innovation should be integrated to enhance firm competitiveness. The viewpoint proposed is that knowledge management is an important element for small and medium enterprises in today’s dynamic and competitive environment.
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