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This paper examines knowledge management and innovation in the Australian Construction Industry. A conceptual model is presented, based upon analysis of the literature and a series of preliminary construction industry interviews. Extensive knowledge management (KM) research has focused upon types of knowledge contained within specific organizational settings. However, we argue that a crucial missing link in KM research concerns the interface between flows of knowledge from external sources of innovations and its channelization in and out, and between organizations. This interface, regulating and facilitating knowledge from external sources of innovation into the organisation, operates under the influence of two main forces visualized as “pulling” and “pushing” forces in the model presented in this paper. The premise of the model lies in a hypothesis that as an organization changes itself into a more mature, learning organization (LO) over time, knowledge flows into it through “pull” rather than “push” forces. We conclude that a successful knowledge management initiative installs a learning and knowledge sharing culture, which is easily adaptable to new learning offering little resistance to new knowledge that flows into the organisation. The model bridges the gap between research and its application in construction practice.