@Kamal and @Krishnan have given You the information that You have asked for. Furhermore, I recommend the following paper "Organizational capabilities: Some reflections on the concept". It is fine paper!
First I'd like to address your second question, the one regarding the difference between the two terms within an organizational context. I think that’s a tricky question because the actual difference between capability and capacity is often very small and subtle.
An organizational CAPABILITY can mean that, for example, a company is able to perform certain functions in a certain way and might even be able to improve on them. For instance, a logistics company may have the CAPABILITY of delivering certain goods to shipping addresses within the contiguous US in less than 48 hours. A customer might choose this company over a competitor that has merely the CAPABILITY of delivering similar goods in less than 60 hours because this second company’s current CAPACITY won’t allow them to deliver faster at this time - perhaps due to limited resources such as trucks, planes, staff quantity and quality, IT systems etc. If the latter company increases its CAPACITY it might, possibly, in the end also improve its CAPABILITY.
In the context of higher education institutions it could perhaps refer to the capability of educating young people in such a way that they will easily find a well-paying job after graduation.
Higher education institutions develop capabilities based on efficiency logics, normative logics, or a combination of both. In the case of the former, economic rationality tends to dominate this cluster of capabilities, improving organizational performance or compliance. Capabilities in this respect are often based around resource dependencies that allow schools to attract tuition paying students or government funding. Student careerist, human resource and operational capabilities are all directly linked to this. Rankings have placed careerist performance (graduates getting jobs) as an important need, while Higher Education teaching and research institutions need to attract quality faculty for basic research production and improved teaching abilities. Managing these elements needs to occur efficiently with operational capabilities like academic IT support, student management and a large number of operational processes working smoothly and effectively. This intern improves rankings, research and teaching output and intern allows access to greater resources. Capabilities are also developed for normative reasons, also referred to as institutional drivers. In essence institutions want to be seen as legitimate by their peers (other higher education institution and those inside those institutions). To do this however capabilities need to be developed to impress other players. Often this can in fact be counter to economic rationality. What I have discussed are staple capabilities, however some institutions obtain advantages over other higher education institutions by doing things differently. European schools for example have developed very strong ties with industry. The way they foster this (networks, collaborative agreements) are hard to copy and capabilities that give their institutions advantages over others. Hope this helps. I can offer a number of readings if you wish.