The mechanism of information technology (IT) influencing firm competitiveness is a key antecedent of IT investment. Based on core competency theory, a research model that interrelates IT resource, IT application capability, core capability, envi-ronmental dynamics, and firm performance, is built up to investigate the underlying mechanism of IT influencing firm competi-tiveness. The model is empirically tested using data collected from 296 firms in China by PLS-based structural equation model. The results suggest that finn's core competencies mediate the effects of IT resources and IT application capability on firm perform-ante, and environmental dynamics moderate the process of IT impacting on firm competitiveness. Therefore, the mechanisms of IT influencing firm competitiveness vary in different environmental dynamics. Under stable environments, more attentions should be paid to picking appropriate IT resource that can be used.to support firm's core competencies. Under dynamic environments, IT application capabilities must be built to continuously support dynamic core competencies, and then improve firm performance.