Globalization process has been tearing down the walls, hence flattening the world. Improved transportation and communication possibilities have enabled easier and faster cross-border flow of people, money, capital, goods and services. Parallel to this, international competitiveness has become ever more important in a globalizing world. Universities, be it public or private, are critical institutions in the development, change and transformation of the nations. They can contribute to a nation’s competitiveness primarily in two ways: raising skilled labor, developing new technologies and promoting innovation. This study stresses three interrelated issues in order for the universities to make their expected contribution to a nation’s competitiveness: market-oriented operation of the universities, minimization of their dependency on public funding, and promotion of competition among universities. A university where its graduates cannot find job and there is no contribution to technology and innovation is nothing more than waste of resources. Therefore, in order to increase performance of the universities, such measures should be taken as to reduce their dependency on public funding, promote universityindustry collaboration, increase contribution of the beneficiaries to finance the expenditures of the higher education services, and allocate public funds to universities based on their academic and innovative performance.