Neoclassical realism holds that the actions of a state in the international system can be explained by systemic variables – such as the distribution of power capabilities among states – as well as cognitive variables – such as the perception and misperception of systemic pressures, other states' intentions, or threats – and domestic variables – such as state institutions, elites, and societal actors within society – affecting the power and freedom of action of the decision-makers in foreign policy. While holding true to the neorealist concept of balance of power, neoclassical realism further adds that states' mistrust and inability to perceive one another accurately, or state leaders' inability to mobilize state power and public support can result in an underexpansion or underbalancing behaviour leading to imbalances within the international system, the rise and fall of great powers, and war:
Appropriate balancing occurs when a state correctly perceives another state's intentions and balances accordingly.
Inappropriate balancing or overbalancing occurs when a state incorrectly perceives another state as threatening, and uses too many resources than it needs to in order to balance. This causes an imbalance.
Underbalancing occurs when a state fails to balance, out of either inefficiency or incorrectly perceiving a state as less of threat than it actually is. This causes an imbalance.
Nonbalancing occurs when a state avoids balancing through buck passing, bandwagoning, or other escapes. A state may choose to do this for a number of reasons, including an inability to balance.