This conceptual paper addresses a critical gap in emerging market strategy by developing a theoretical framework for leveraging Indigenous Knowledge Systems (IKS) as strategic sources of competitive advantage for Malawian Small and Medium Enterprises (SMEs). In contrast to the predominance of Western strategic models, the article argues that the very institutional voids and resource constraints that characterize emerging markets create conditions where culturally-embedded IKS become valuable, rare, inimitable, and non-substitutable (VRIN) resources. Through systematic literature synthesis, the article proposes a novel tripartite typology, categorizing IKS as Relational (social networks and Umunthu philosophy), Substitutive (informal systems like chipereganyu financial associations), and Innovative (local ecological and artisanal knowledge). This framework explicates the distinct mechanisms through which each category generates advantage: building trust-based relational capital, filling institutional voids via social enforcement, and driving context-specific innovation. The study’s core contribution, however, is the identification and theorization of a central ‘codification dilemma’—the inherent tension between formalizing tacit IKS for commercial scale and preserving its authentic, culturally-embedded value and inimitability. This dilemma represents a pivotal strategic paradox for practitioners. Consequently, the study provides a decolonized strategic framework that transforms perceived institutional weaknesses into a foundation for sustainable advantage. It offers specific, actionable guidance for SME owners to audit and leverage indigenous assets and for policymakers to develop hybrid institutions that ethically protect and valorize local knowledge, presenting a roadmap for authentic business development in Malawi and similar emerging economies.