The concept of external governance seeks to capture the expanding scope of EU rules beyond EU borders. This article elaborates the theoretical foundations of this concept, differentiates the various institutional modes through which external governance takes place and suggests a set of hypotheses addressing the conditions under which EU external governance is effective. Here, we contrast institutionalist explanations, which are the most germane to an external governance approach, with competing expectations derived from power-based theories and approaches emphasizing the role of domestic factors in the target countries.