This theoretical contribution explores the use of four analytical elements to understand European cities' commonalities and distinctive characteristics in the face of the challenges presented by structural global changes and supra‐national governance mechanisms: sovereignty, policy, politics, context. The article shows how institutional and contextual opportunities mediate globalization's repercussions to varying degrees at the urban level, according to national and regional dynamics and institutional frameworks as well as urban governance structures. Additionally, the article argues that the local policy capacity of cities and their ability to innovate and deal with new social challenges are shaped by the interplay among the four specific elements mentioned before.