The Developmental State and the Rise of the Iranian Automobile Industry Since the 1980s, successful industrial development has been attributed to the concept of the developmental state where rapid economic growth is associated with “autonomous” development bureaucracies that coordinate development activities around a single set of objectives. A subset of the development state scholarship is the work on state capacity that claims successful development is attained when a state has autonomous bureaucracies that are embedded in society to coordinate effective policies. By all scholarly accounts since the revolution, Iran lacks the state capacity to conduct coherent industrial development. Scholars have argued that factionalism has led to a diminution of state autonomy resulting in incoherent economic planning that in turn has led to industrial decline. In addition, Islamic institutions and foundations that own large industrial organizations are implicated in transforming Iran into a rent-seeking, predatory state. The success of the Iranian automobile industry however strongly contradicts current scholarly accounts. Iran has developed a national industry with high local manufacturing content while becoming the world’s eleventh largest producer of passenger cars and the fifth largest in the global south. In this paper I will argue that even in a larger state apparatus that is politically fractious and has strong predatory tendencies, state-led development can succeed as long as key actors connected to an industry can construct a network of politically effective relationships to decouple a key set of organizations from other parts of the state apparatus to create a "developmental state" within the automotive sector. To explain this process, embedded autonomy theory will be “reconstructed” to explain how state elites in politically fractious states can achieve their industrial development goals. Two components of embedded autonomy at two historical time periods will be analyzed. The first is the early period when industrial nationalists established industry autonomy by defeating political factions opposed to automobile industrial development. The second is a period of deepening embeddedness when industrialists constructed an internal network of social ties to protect the industry from predatory behavior, and a network of global-local ties to multinational corporations to build an industry with high local manufacturing content. My analysis is based on fifty-one in-depth interviews with corporate and state managers of development organizations, archival data and an industry social network data set of ownership gathered during fieldwork conducted in Iran in 2011.