Determinants of Cross-Border Activity in the Sme Sector of Eastern Eu Border Regions Before the Pandemic

This study analyses the factors influencing cross-border business activity of companies located in the cross-border region of Poland, which is also the eastern border of the EU (neighbouring the Russian Federation, Lithuania, Belarus, Ukraine and Slovakia). The paper examines the key determinants of cross-border business activity by analysing survey data collected from 338 firms located within 70 km of the border. Using logit models incorporating regional, sectoral and country-fixed effects, the factors influencing the likelihood of firms engaging in foreign market activities are compared with general internationalisation determinants.

The results indicate that firm size, comprehensive knowledge of the cross-border market and cooperation with other entities already active in the target market are the primary drivers of cross-border internationalisation. Furthermore, the findings reveal significant geographic heterogeneity in the agglomeration effect: the concentration of firms already present in a cross-border market stimulates new entries more strongly in markets characterised by higher institutional uncertainty, such as Belarus and Ukraine, than in more stable environments.

The study contributes to the literature by demonstrating how the interplay between knowledge-based and spatial factors shapes cross-border engagement in institutionally diverse and geopolitically sensitive border regions. The findings also suggest that policy interventions should be more territorially differentiated and focused on strengthening local knowledge spillovers and facilitating initial cross-border engagement in less developed areas.