The evolution of SME development in the EU's cross-border cooperation: the example of direct funding in the Hungary-Croatia Interreg programme

Cross-border cooperation has become an integrated element of the European Union’s Cohesion Policy. Inline with the strategic objectives, entrepreneurship and innovation have gained importance from period toperiod. Although cross-border programmes are generally understood as non-profit schemes, direct SMEfunding appeared already in the 2007-2013 period. On the basis of some Western European examples, apilot programme was implemented in the Croatia-Hungary border area in the 2014-2020 period that directly supported businesses. The paper, after providing an overlook on SME development in EU cross-border cooperation, summarisesthe particularities of the analysed instrument. The paper defines two research questions: sectoralcharacteristics, specialisation patterns in some types of settlements; and the presence of innovation in thesubmitted and funded projects. The first question is answered through an analysis of the sectoral andsettlement category breakdown of projects, while for the second a simple methodology is presented tomeasure to what extent innovation was in focus. For the analysis programme level data was used.The paper’s main finding is that, due to the logic of the scheme, innovation was easier to present in thecase of more “materialised” sectors, such as wood processing, manufacturing and machine production,leading to higher success rates than in case of the service sector where cooperation between partners was less obvious. Even if the majority of the projects only promoted market entrance instead of innovation,rural areas have shown a higher success rate, demonstrating a relatively balanced spatial structure.