This study investigates the impact of counter-knowledge on the relationship between knowledge management and business performance. Regarding this, much has been written about why it is important to manage knowledge but considerably less has been written about the role played by counter-knowledge in the different knowledge processes. Following previous attempts to identify and define the different knowledge processes, we propose the following processes as the main knowledge management processes required to increase firm performance: realized absorptive capacity, organizational memory, and knowledge application. Then we analyse the counter-knowledge’s influence on knowledge management processes and the possible impact on firm performance. A model is tested to examine the impact of counter-knowledge on the knowledge management processes and the firm performance on the Spanish banking industry from a quantitative approach. Specifically, we tested our hypotheses using a SEM approach based on composites (PLS). The unit of analysis is branch-office managers from the 15 banks operating in Spain in 2013. Data were collected from 151 branch-office managers. The assumption that knowledge management is an organizational capability implies that firms need to possess a set of resources in order to create, share, and use knowledge (Chou et al., 2007; Lin, 2007; among others). Therefore, organizations should have processes for sharing knowledge (i.e., organizational memory) and for using the knowledge created (i.e., knowledge application) in order to support the management of knowledge to increase business performance. Given the importance of external knowledge for the development and increase in employees’ knowledge and learning capabilities (Jantunen, 2005; Newey and Zahra, 2009), realized absorptive capacity also represents an important part of a firm’s ability to create new knowledge (Chou, 2005; Lane, Koka, and Pathak, 2006; Liao et al., 2010). The analysis of the role of counter-knowledge in this classic relationship is the value of this paper. The considerations discussed above allow us to put forward the argument that counter-knowledge plays an important role in knowledge management since it influences knowledge management processes (i.e., realized absorptive capacity, organizational memory, and knowledge application). According to Cegarra, Eldridge and Gamo (2012), counter-knowledge can be seen as a natural deterioration or depreciation of organizational knowledge, usually with negative consequences for customers. This paper tries to support empirically the effect of counter-knowledge in the knowledge management processes and firm performance.