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The positive influence of crystallographic compatibility on the thermal transformation stability has been already investigated extensively in the literature. However, its influence on the stability of the shape memory effect or superelasticity used in actual applications is still unresolved. In this investigation sputtered films of a highly compatible TiNiCuCo composition with a transformation matrix middle eigenvalue of 1 ± 0.01 are exposed to thermal as well as to superelastic cycling. In agreement with previous results the thermal transformation of this alloy is with a temperature shift of less than 0.1K for 40 cycles very stable; on the other hand, superelastic degradation behaviour was found to depend strongly on heat treatment parameters. To reveal the transformation dissimilarities between the differently heat-treated samples, the microstructure has been analysed by transmission electron microscopy, in situ stress polarization microscopy and synchrotron analysis. It is found that good crystallographic stability is not a sufficient criterion to avoid defect generation which guarantees high superelastic stability. For the investigated alloy, a small grain size was identified as the determining factor which increases the yield strength of the composition and decreases the functional degradation during superelastic cycling. [ABSTRACT FROM AUTHOR]