Every firm learns through firm specific methods. This learning process is operationalized by firm’s knowledge management practices. Therefore, knowledge to result in successful learning should be assisted by a combinative framework which can enhance a firms’ absorptive capability. This in turn will play a decisive role for achieving competitive advantage. Current literature in strategic management focuses towards dynamic capability as a source of competitive advantage. Earlier studies have focused their attention on direct relationships among few selective factors like knowledge management framework only; therefore the lack of clarity can be traced to under-specification of the models that the previous studies have examined. Specifically, studies provide limited view of absorptive capability by ignoring the constituting factors which should be integrated. Absorptive capability is a type of dynamic capability. Absorptive capability as a construct involves framework for managing knowledge, ability to combine the existing and acquired knowledge and leveraging knowledge through learning for innovation. Using absorptive capability as a mediator a model to understand the drivers of competitive advantage in Indian Pharmaceutical Industry is developed.