SMEs are a significant generator of jobs and economic value added in the city of Sombor, town of Belišće and the surrounding rural areas that gravitate towards them (Vojvodina and Slavonija). Direct evidence of that statement is the number of SMEs in this area (275 active SMEs domiciled in Belišće, approx. 2300 in Sombor) and the number of employees in SMEs relative to the total complement of employees in the private sector of the two cities. The main challenge SMEs in the city of Sombor and town of Belišće face is the shortage of skilled labor force in the dominant industries in the area – paper industry and mechanical engineering in Belišće and agriculture in Sombor. On the other hand, both cities have high unemployment rates (1.010 people in Belišće, 5377/13% in Sombor) combined with high recorded number of job vacancies (e.g. 391 in Belišće). As a result, local SMEs are increasingly experiencing difficulties in finding adequate workers which eventually restrains their potential for innovation, based either on frontier-research or new applications/combinations of already-existing knowledge. Additionally, both Serbian and Croatian SMEs have difficulties in acquiring useful information about abroad business expanding. Stated challenges derive from structural constraints attributive to the area: 1. the education system’s lack of responsiveness to the skills needs of SMEs; 2. shortage of comprehensive entrepreneurial education for potential new entrepreneurs in the area; 3. sustained emigration of highly trained and qualified workers to more developed EU member states. Mitigating the identified challenges requires systemic strengthening of interactions between relevant existing industrial actors, local government, academic institutions and civil society (NGOs), which are rudimentary to this day. The project aims to change this dynamic through the creation of two industry specific cross-border clusters in the city of Sombor and town of Belišće.