This paper reviewed the two proposed hypotheses. The first hypothesis is to test the relationship between knowledge management and incremental innovation, and the second hypothesis is to test the moderating effect of firm-size on that relationship. Data were gathered from 434 employees in service industry, and multiple regression analysis was used to test two proposed hypotheses. In the first hypothesis, it was appeared that knowledge acquisition and knowledge transfer have positive effects on all incremental innovation factors (process innovation, operation innovation, service innovation). In the second hypothesis, it was appeared that firm-size has an positive interaction effect on incremental innovation in knowledge transfer, but not in knowledge acquisition. It means that knowledge transfer has more positive effect on incremental innovation in large firm-size than in small firm-size.