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Higher education systems around the globe are experimenting with different strategies to foster internationalization and networking, achieve critical research mass, and strengthen innovation and labour market integration. This paper discusses how Portugal, since 2006, has pursued a distinctive international collaborative strategy to induce critical changes in strategic focus areas at its leading institutions. Utilizing survey and interview data from the MIT-Portugal Program, this paper demonstrates how international collaborations are used to raise student internationalization and selectivity rates, to create national clusters of excellence, and to re-orient engineering education towards innovation and entrepreneurship. The data show that MIT-Portugal has created significant spillovers into Portuguese institutions, underscoring the potential of international collaborations to be drivers of systemic change. We argue Portugal's collaborative approach represents a model strategy for building a targeted human resource, research, and innovation base suited for long-term economic growth. Our findings are relevant for other countries facing similar transition challenges. [ABSTRACT FROM AUTHOR]