Organizational innovation has been viewed as an essential weapon for organizations to compete in
this competitive business environment. Particularly, Malaysia manufacturing firms strive to transform their
business model from labor-intensive to knowledge-intensive, which aim to immerse themselves in higher value
added activities such as, developing new products, processes, and services, to continual sustain the
competitiveness within the rivalries. One of the ways to heighten the organizational innovation is through effective
human resource management (HRM) practices and effective knowledge management. This study examined the
direct relationships between HRM practices (performance appraisal, career management, training, reward
system, and recruitment) and organizational innovation (product innovation, process innovation, and
administrative innovation). Additionally, it also examined the mediating role of KM effectiveness on the direct
relationship. Data was drawn from a sample of 171 large manufacturing firms in Malaysia. The regression results
showed that HRM practices generally have a positive effect on organizational innovation. Specifically, the
findings indicate that training was positively related to three dimensions of organizational innovation (product
innovation, process innovation, and administrative innovation). Performance appraisal also found to have a
positive effect on administrative innovation. Additionally, this study also demonstrates that training and
performance appraisal, are positively related to knowledge management effectiveness. Knowledge management
effectiveness fully mediates the relationship between training and process innovation, training and administrative
innovation, and performance appraisal and administrative innovation. A discussion of the findings, limitations, and
implications are provided.