The study addresses how the knowledge economy is crucial for empowering small and medium enterprises (SMEs) amid rapid technological and economic changes. Despite SMEs' vital economic role, many struggle to adopt knowledge economy components to improve performance and global competitiveness. The research aims to analyse the knowledge economy’s pillars, evaluate its impact on SMEs, review successful global practices, identify adoption challenges, and propose recommendations to integrate SMEs into global value chains. Methodologically, it combines descriptive analysis of concepts and literature, comparative studies of countries like Singapore and Malaysia, and applied case studies to understand challenges and solutions. The conclusion emphasizes that integrating the knowledge economy with global value chains enhances SMEs’ capacities and market access. Empowerment requires modernizing education and training, investing in digital infrastructure, reducing bureaucratic barriers, supporting R&D, and fostering partnerships for technology and knowledge transfer. A flexible regulatory environment that encourages innovation and equal opportunity is key for SMEs to thrive. Overall, this integration is strategic for sustainable SME growth and building a competitive national knowledge economy.