Public higher education institutions (PHEIs) have widely acknowledged a positive relationship between internationalization and their institutional competitive advantage enhancement. Although some concerns have been raised by practitioners and researchers about whether institutional competitive advantage can be enhanced given the current ways of pursuing internationalisation, surprisingly this relationship has not yet been investigated. This study aims to define this relationship with the empirical data collected through 73 interviews at 16 Dutch PHEIs. This research contributes to the current education literature in three areas. First, this study provides evidence that internationalisation has been seen by the majority of interviewees as the means by which universities gain a competitive advantage and enhance their overall performance in the local and global competition. Second, three foundations have been identified upon which this relationship is established. Third, the data analysis along the sector and job functions gives new insights into how research universities and universities of applied sciences view this relationship differently, and where the gap is between the senior management level and faculty level in enhancing their competitive advantage through internationalisation.