Abstract: To obtain and maintain sustainable competitive advantage is the fundamental problem of strategic management. On this issue, the strategic management theory has evolved the theory of industrial position, resource-based view, the theory of core competence and dynamic capabilities, and knowledge-based view. In the competitive era of globalization and increasing uncertainty, knowledge is increasingly becoming the core strategic resource for firms to maintain strategic flexibility and pursuit sustainable competitive advantage. Knowledge management and its mechanism of firm’s competitive advantages are becoming hot issues of strategic management.