This　research　develops　uses　of　the　tacit　knowledge　index　(TKI)　to　assess　the　level　of　tacit　knowledge　within　firms　and　the　effect　of　tacit　knowledge　on　firm　performance.　We　draw　on　a　sample　of　108　Beijing　firms　using　knowledge　management　to　determine　each　firm＇s　TKI　and　their　use　of　knowledge　management　methods.　We　develop　a　measure　that　includes　both　the　degree　of　usage　and　the　tacitness　of　the　knowledge　management　method　and　use　regression　and　correlation　to　statistically　analyze　the　innovation　and　financial　outcomes.　Significant　relationships　are　found　between　a　firm＇s　level　of　TKI　and　the　firm＇s　performance.　Those　firms　that　have　a　higher　degree　of　tacit　knowledge,　as　measured　by　the　TKI,　perform　better　on　both　financial　and　innovation　business　metrics.