250 Knowledge Management Adoption among Malaysia’s SMEs: Critical Factors Tan Nya Ling, Lim Yuh Shan 1,2 Faculty of Business & Law, Multimedia University (MMU), Jalan Ayer Keroh Lama, 75450 Melaka, MALAYSIA nltan@mmu.edu.my, sunshanlim@yahoo.com ABSTRACT The value and importance of knowledge, as seen by numerous organisations today, does without a doubt play a crucial role in the current ever-challenging and aggressive business environment. As a result, businesses that aspire to be labelled as being successful and competitive need to seek and find better ways to improve their firms’ performance. Hence, knowledge management (KM), which is viewed as a source of sustainable competitive advantage, has attracted the attention of various companies all over the business world, including small and medium enterprises (SMEs) in Malaysia. With the realisation of KM, the systematic management of organisation knowledge - a strategic corporate asset not to be taken lightly, can thus be created, transferred, shared, and, utilised, in pushing for greater organisational competitiveness, innovativeness and, productivity. The study determines and examines the critical success factors (CSFs) of SMEs that further influences KM processes; knowledge creation, transfer, sharing, utilisation. The CSFs observed in this research; culture; leadership; employee participation; information and communications technology (ICT); organisational structure; are thoroughly investigated to explore on whether these factors have an impact on knowledge creation; knowledge transfer; knowledge sharing; and knowledge utilisation of KM processes among SMEs in Malaysia. The findings may be used as recommendations to SMEs that are keen in adopting KM in their daily operations. Furthermore, this study may also serve as a basis for future quantitative research studies among researchers, practitioners, and professionals alike, in gaining a profound understanding of KM in sectors other than SMEs. Keywords Knowledge management; Critical success factors; KM processes; Small and medium enterprises 1.0 INTRODUCTION In today’s business world, the perception and inclination of knowledge is gradually increasing. In this day and age, knowledge is viewed to be the most important organisational resource that carries unprecedented value and therefore should not be left unscrutinised as compared to conventional business assets, such as land, labour, and capital. As a consequence, knowledge together with change and globalisation has become the most important driving force and commercial asset of the 21 st century economy. It is this so called ‘knowledge’ that has in fact become the emerging discipline popularly known as knowledge management (KM) (KLM, 2002). Firms, who are seen to have adopted KM, are undoubtedly reaping the continuous benefits of what KM has to offer. Such benefits include better decision making, faster response time, increased profit and, improved productivity (KPMG, 1998). As a result, a number of private and public organisations, attracted by the lucrative returns of what KM has to offer are therefore being lured and seemingly delighted in embracing and implementing KM. Subsequently, firms are now unknowingly grasping to the most important intangible asset vis-à- vis knowledge that will be fully managed and utilised just by plainly implementing KM (Sharifuddin, Ikhsan, & Rowlandb, 2007). Moreover, the effective management of organisational knowledge is believed to be linked with competitive advantage and hence considered critical to the success of an organisation (Nonaka, 1998). Small and medium enterprises (SMEs) are often regarded as the backbone of industrial development and important source of growth in Malaysia economy. SMEs in Malaysia are divided into two distinct categories: 1) Manufacturing, Manufacturing-Related Services and Agro-based industries and 2) Services, Primary Agriculture and Information & Communication Technology (ICT) ("SME Corp Malaysia," 2009). According to National SME Development Council’s Annual Report 2008, almost 99.2 percent of the total business establishments in Malaysia consisted of SMEs. It is also further revealed that the emergences