In response to rapid changes in business environment, enterprises deploy knowledge management technologies to improve adaptability and increase their chances of survival. This paper theorizes the causal relationship between a firm?s agility and its IT knowledge management capacities. We posit that the prerequisite to agility is the ability of the firm to reconfigure processes, resources, and routines-in other words its dynamic capabilities. On the other hand, the building of dynamic capabilities is only possible if the firm has the ability to sense and response to the dynamic of the environment. Knowledge management technology and social structure are postulated to influence the absorptive capacity, which in turn is considered an antecedent to dynamic capabilities of the firm. We also identify the intellectual assets necessary to sense and respond to the environment and IT capabilities required to support and implement change initiatives.