Abstract:  The literature on the European Union’s (EU) industrial policy turn has convincingly explained the origins of this paradigmatic shift. However, less is known about how these policies play out on the ground and how member states differ in using them. Existing research highlights significant cross-country variation in industrial policy subsidies within the Union. Scholars and policymakers attribute this to diverging fiscal capacities between member states, warning that pursuing industrial policy through nationally funded state aid risks fragmenting the bloc’s single market. Yet, this puzzling variation cannot be explained through fiscal capacity alone. This article addresses these gaps by mapping and explaining variation between EU member states in their state aid for Important Projects of Common European Interest (IPCEIs), often labeled the “poster child” of the EU’s industrial policy. The article asks: “Under which conditions do EU member states provide state aid for IPCEIs?” It first develops eight political-economic hypotheses from the literatures on industrial policy, geoeconomics, and state aid. These hypotheses are then tested through fuzzy-set qualitative comparative analysis (fsQCA), explaining the variation in the amount of state aid the 27 EU member states provided under the IPCEI framework. The results show that a country’s IPCEI state aid is shaped by the size of its economy, fiscal stress, exposure to Chinese foreign direct investment, past state aid spending, and ideological preferences of its government. Through a nuanced analysis of the determinants of IPCEI participation, the article clarifies how EU industrial policy—in this case, IPCEIs—plays out on the ground.

Keywords:  European Union; geoeconomics; industrial policy; IPCEIs; single market; state aid

Published:   22 April 2026

Issue:   Vol 14 (2026): Doing Industrial Policy in a Geotech World: Challenges and Opportunities (In Progress)