Transnational collaboration between higher education institutions offers many potential benefits but effective cross-border engagement -- and developing policies to support it -- can be challenging. Based on a review of available evidence, this policy paper identifies three key challenges to effective policy making. Academics and autonomous institutions may lack incentives to engage in collaboration driven by external objectives. Misalignment may exist between policies and political priorities that influence transnational engagement in individual higher education systems -- whether within higher education policies, or between higher education, foreign, international development, migration, security, economic, industrial and trade policies, or between priorities of different levels of policy making. Finally, incompatibilities between policies and institutional practices in different countries complicate transnational collaboration. Drawing on international experience, this paper proposes six policy approaches: adopting cross-government approaches; enhancing international compatibility of regulations; incentivising collaboration through funding; strengthening institutional capacity for internationalisation; supporting diverse forms of engagement; and promoting symmetrical engagement.