Chapter 2 introduces the main concepts, namely “areas of limited statehood” and “governance.” We discuss functional and institutional conceptualizations of the state and explain why we settle for an institutional understanding in the tradition of Max Weber. We conceptualize areas of limited statehood as referring to those spaces where state institutions are too weak to implement and enforce central decisions and/or to uphold a monopoly of the use of force. We continue by discussing measurement issues and providing empirical examples for measuring limited statehood, including subnational levels. We then turn to introducing our understanding of “governance,” which we define as institutionalized modes of social coordination to adopt and implement collectively binding rules, or to provide collective goods and services. The chapter concludes with a discussion of several issues emerging when applying the governance concept to areas of limited statehood. This concerns, on the one hand, the distinction between the “public” and the “private” spheres common to Western modernity, which has to be adjusted to conditions of limited statehood. On the other hand, the inherent intentionality and normativity of the governance concepts need to be taken into account.