Abstract: By applying knowledge management theory and exchange costs theory in a comprehensive way, this paper aims to establish the models of industrial cooperation boosting work division development, and on the basis of the models it studies an industrial cooperation model that is based on knowledge exchange. The conclusion of the study is that under the situation of low knowledge exchange rate at work division joints, an industrial cooperation that depends on enterprises or the market will not certainly be smoothly realized due to the existence of cooperation risks, nor will profitable new work divisions be developed. Cooperation risks are equivalent to exchange costs, so it is feasible to use exchange costs theory to produce two industrial cooperation models that are based on knowledge exchanges.