In this paper, a study is made of the effects of local and cross-border cooperation between small and medium sized enterprises (SMEs) on company innovation and performance. In line with previous works, it is maintained that cooperation positively impacts on company performance and innovation levels, while also finding that this effect is likely to be moderated by just how the firm conceives its cooperation configuration.A bivariate linear model was used to test a a sample of 61 Portuguese and Spanish cross-border SMEs. The results confirm that cooperation is positively associated with company performance and innovation results. However, the cooperation configuration reveals different characteristics. It is conclude that co-operation with suppliers and qualified human resources are determining factors of local co-operation. In contrast, innovation related activities are crucial to cross-border cooperative activities. Overall, a contribution is made to the existing local and cross-border co-operation literature by demonstrating how SMEs may leverage increasing returns when able to combine innovation and cooperation.
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