The proposed research will analyze the political economy of industrial promotion programs at the subnational level in India and Mexico. Existing literature on the political economy of development places central emphasis on the role played by national governments in fostering new economic investment. Over the past two decades, however, market-oriented reforms in combination with administrative decentralization have increased the importance of subnational governments for promoting industrial development. To shed new light on these trends, the proposed research will address two central questions about subnational industrial promotion policies in less developed and emerging market nations. First, what accounts for variation in the level of development activity by governments across subnational political units? Second, what factors account for variation in the types of industrial policies adopted by subnational governments to promote foreign investment and industrial development? To answer these questions, the analysis will focus upon the institutional factors surrounding policy choice at the subnational level in two major developing nations. The research design will employ an in-depth qualitative comparison of industrial policy in three states in both India and Mexico, nested within a large-n cross-sectional time-series analysis of subnational policy choice in the two countries.