This study aims to investigate the relationship between knowledge sharing, absorptive capacity, innovation capability and competitive advantage in Hong Kong Higher Education Industry. A theoretical framework was developed to examine the relationship between knowledge sharing and competitive advantage, mediated by absorptive capacity and innovation capability. A questionnaire was used to survey a randomly selected sample of academics from higher education institutions in Hong Kong. A total of 166 usable responses were received and analysed. PLS-SEM was utilised to test the hypotheses in the theoretical model. The result exhibits that significant positive relationships were identified between knowledge sharing and absorptive capacity, between absorptive capacity and innovation capability and between innovation capability and competitive advantage. Practically, senior management from higher education institutions should develop strategic measures, especially on knowledge sharing, absorptive capacity and innovation capability, in order to gain competitive advantage. Policymakers could also develop policies to facilitate knowledge sharing among local and regional higher education institutions. This study contributes to existing literature by identifying the significant mediating role of absorptive capacity in the linkage between knowledge sharing and innovation capability and by strengthening the positive association between innovation capability and competitive advantage.