Many scholars and policymakers see transnational governance as a substitute for lackluster national and international policies, particularly in the context of intergovernmental gridlock or limited state capacity. The bulk of the literature explains sub- and non-state actors' participation in transnational initiatives as a product of, on the one hand, micro-level incentives and, on the other, diffusion processes that create and spread normative and market-based pressures. We argue that such theoretical perspectives overlook the dynamic relationship between national policies and transnational governance. First, we argue that ambitious national policies positively affect sub- and non-state actors' participation in transnational governance. Second, we posit that domestic institutions condition the effects of micro-level incentives and transnational pressures on participation in transnational governance. We test these claims in the climate regime, using an original dataset that, for the first time, measures cross-national participation in transnational climate initiatives across jurisdictions. The results support our expectations. They therefore suggest that we should understand national policies and transnational governance as complements, rather than competitors, to one another. Finally, by showing how and when national policies affect participation in transnational initiatives, we identify important scope conditions for their significance in addressing climate change.