The modern fully sovereign state as the template for organizing our understanding of statehood is largely a myth. The most common version of statehood is characterized by “areas of limited statehood:” these are parts of the territory or policy areas in which the central government lacks the capacity to implement decisions and/or its monopoly over the means of violence is challenged. These areas are not ungoverned spaces or lacking governance. Collective goods are often provided under extremely constrained domestic sovereignty—by a variety of state and non-state, local and transnational plus international actors. In this chapter I first conceptualize limited statehood and show its empirical validity as the default situation in the international system. Second, I criticize the prevailing paradigms on statehood and state transformations as biased toward Western and European modernity. Third, I demonstrate that there are functioning alternatives to the “shadow of hierarchy” cast by the state.