Abstract
The purpose of this research is to explore the importance of organisational learning in smallmedium family firms in Australia and its significance in promoting the sustainability of firms by enhancing competitive advantages. Furthermore, this research intends to provide insight on how transformational leadership can influence knowledge management and the learning process in family firms. For this research, qualitative research methodology was used and semi-structured interview was conducted with the leading members of SME family firms from Australia who are involved in craft industry. Due to the unfortunate circumstances of the COVID-19, the dataset was limited to seven participants. Grounded theory has been used as a research strategy to develop a framework of the organisational learning process to enhance the prospects of sustainability in family firms. The findings of this research suggests that by combining and recombining inherent knowledge, experience with the acquired knowledge of the members of the family firms, firms can generate competitive advantage. Furthermore, the significant role of transformational leadership was found in creating learning culture and ultimately resulting in enhanced competitive advantage.