During the late 1970s and 1980s, Sweden and Japan both experienced a decentralization of industrial policy decision-making and implementation. This article analyses the theoretical and empirical relationships between state and local industrial policies during processes of structural change and also how structural change affects regionally targeted policies. It is argued that although increasing emphasis on local mobilization and autonomy on industrial policy matters may enhance local efficiency, it may at the same time confront state policy-makers with increasing problems of maintaining co-ordination and the resolution of industrial problems at a sectoral level. Also, at the same time as structural change solves industrial policy problems, it generates other problems associated with regional imbalances. Finally, structural change exacerbates competition for businesses among different locales. In some cases, and most prominently in Japan, the nation-state government encourages this competition, since it increases planning accuracy and local mobilization of resources.