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Is there any definition of "innovative" SME? Are there criteria to justify that a SME is "innovative" enough to apply for the SME Instrument? How can a SME justify this?

Answer: 

Innovation has many facets; important ones are of course SUCCESS. How many new products/ technologies have your company launched successfully in the past years, how many patents filed, etc.? If you can show this for past innovations, evaluators might trust you that with your new idea you will be successful again.