Many scholars have convincingly shown that policies diffuse between national and sub-national entities for several different reasons. Although diffusion processes are empirically proven, we witness two shortcomings in the discussion: First, there is a lack of comparative research across policy areas. Second, the question of why diffusion might not occur in a certain domain is under-theorized and lacks an empirical test. By comparing the rationale behind diffusion processes in two policy domains—energy policy and locational policy—this paper shows that two aspects matter for diffusion processes: First is the observability of policy measures, that is, how easily things can be observed by others; second is the competitiveness of the policy domain. If policy measures can be hidden easily and the policy domain is highly competitive, policy diffusion is very unlikely to happen. Therefore, we seek the integration of these two aspects in prospective diffusion research.