Effective and efficient management of human resource was always considered vital for attaining success and sustainable competitive advantages by any organization, but in today’s emerging economies of knowledge, the importance of knowledge management capacity has also emerged as an important ingredient. The institutions of higher education (HEIs) are considered to be the knowledge creating organizations, where the most vital resource for success and sustainability is human capital. Since knowledge management capacity is still an emerging concept in Pakistan, the aim of this paper was to conduct an empirical Study about the effect of knowledge management capacity (KMC) on the relationship of human resource management (HRM) practices and sustainable competitive advantages (SCA) acquired by institutions of higher education in Pakistan, with the help of knowledge-based view (KBV) and resource-based view (RBV). The results of this paper indicate that HRM practices can help HEIs to attain SCA directly as well as indirectly through KMC, which can ultimately help the policy makers of academia to concentrate and made substantial efforts to improve the knowledge management capacity of educational institutions. Future researchers and managers of academia can be benefited from this research as it added to the current knowledge about HRM practices and its effect on KMC of faculty along with attaining sustainable competitiveness.