Recent studies reveal that developing countries cannot achieve good governance in higher education by merely borrowing structures from advanced systems because the globally advocated "one-best-way" approach often ignores levels of institutional capacity in developing countries. This study suggests institutional capacity as a core dimension for practicing good governance in four South Asian countries (Bangladesh, India, Nepal, and Sri Lanka). Building on this, this study compiles data from each country's legislation and the UNESCO data to evaluate the autonomy and capacity of higher education institutions and compares those with Southeast and Northeast Asian countries as a reference. This study finds that these four South Asian countries are grouped into different environments based on the divergent paths to governance improvement suggested for each group. This study concludes that university autonomy is critical for good governance in the long run, whereas it is the capacity building that should be given priority to provide an optimal governance environment.