Recent discussions of urban governance have emphasized a trend towards the ‘entrepreneurialization’ of local politics. This model has been intensively discussed and well documented. However, although this concept has been well tested in economically prosperous locations, less attention has been paid to the situation in marginalized regions characterized by a weak economy and a declining population. Taking eastern Germany as an example of a socio‐economic context marked by deindustrialization and population decline, the article discusses three main aspects of local governance arrangements under such conditions. First ‘coping with decline’ has become a more important issue in local politics than ‘entrepreneurial’ growth‐strategies. Second, successful public–private coalition‐building is severely complicated. Third, local politics are more dependent on resources from the national government than on private investment, lending greater significance to the national level and resulting in ‘grant coalitions’ rather than ‘growth coalitions’. The article focuses on these different experiences and discusses their implications for the analysis of urban governance.