This Article explores an underlying tension in the regulatory competition literature regarding why some jurisdictions are more attractive to firms than others. It pays special attention to offshore financial centers (OFCs). OFCs court the business of nonresidents, offer business friendly regulatory environments, and provide for minimal, if any, taxation on their customers. On the one extreme, OFCs are theorized as merely products of legislative capture— thereby lacking any meaningful agency of their own. On the other hand, OFCs are conceptualized as well-governed jurisdictions that attract investment because of the high quality of their laws and legal institutions—indicating some ability to manage legislative capture. This Article argues that the prevailing explanatory frameworks for OFC development and success overlook deeper institutional structures within these jurisdictions. Drawing on the political sociology literature on state development, this Article offers a new theoretical framework. It suggests that some OFCs may have experienced more success than others because of how they developed “state capacity”—i.e., their ability to formulate and implement specific kinds of policy choices skillfully and effectively. This Article makes two important contributions to the regulatory competition and OFC literatures. First, it places the institutional quality of jurisdictions at the center of the discourse and analysis of OFC achievements in the business law arena. Second, it introduces the interdisciplinary concept of “state capacity” into the growing scholarly debate concerning the rise of OFCs.