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Purpose: This paper aims to examine the role of knowledge management (KM) processes in enhancing competitive strategies of differentiation and cost-effectiveness and its impact on innovativeness in knowledge-intensive service organizations (KISOs) in India. Design/methodology/approach: This study collected data from 293 employees working in Indian KISOs through a questionnaire survey. After checking for reliability and validity of data, this study tested the hypotheses by structural equation modeling using AMOS 26. Findings: The results show that KM processes have a significant and positive relationship with competitive strategy and innovativeness. Competitive strategy partially mediates the relationship between KM processes and innovativeness. These KM processes promote differentiation and cost-effectiveness, which in turn enhances innovativeness. A differentiation strategy has a stronger positive relationship with KM processes and innovativeness than a cost-effective strategy. Research limitations/implications: This study's cross-sectional design limits its ability to establish a general cause–effect relationship. Even so, theoretically, the results corroborate the contingent view of KM in emerging economies such as India. The findings show the mediating role of competitive strategy on the relationship between KM and its processes with innovation and competitiveness – providing a better cost-effectiveness relationship and organizational differentiation capacity. Practical implications: This study suggests managers to adopt KM processes such as creation-sharing, acquisition and knowledge base enabling firms to be different and cost-effective than their competitors. This study provides evidence on how KISOs can leverage their innovativeness by using KM processes in congruence with its competitive strategy and gain competitive advantage. Social implications: This study emphasizes the development of KM processes in the management of KISOs, which contributes substantially to India's economic growth via Gross domestic product and employment. On the social side, this study suggests to manage cultural issues in KM processes, arising because of presence of multi-cultural workforce and a high-power distance society. Originality/value: This study bridges a research gap of previous studies providing empirical evidence regarding the mediating effect of competitive strategies in the relationship between KM processes and innovativeness. This study adds proof to the KM contingency view of firms, suggesting when KM processes are formulated to achieve competitive strategy; substantial benefits such as innovativeness can be realized. This study adds evidence from the emerging economy of India, where KISOs are increasingly creating value and employment. [ABSTRACT FROM AUTHOR]