Infrastructure Expansion and Capability Traps: Divergent Development Trajectories of Community Enterprises Along the Lao–China Railway Corridor

Abstract

Transportation infrastructure development, particularly the Lao–China Railway project, is often expected to generate growth opportunities for the production and service sectors. However, micro-level outcomes remain highly uneven and lack a clear explanatory mechanism, particularly among community enterprises. This study had two objectives: 1) to analyze changes in opportunity structures following the development of the Lao–China Railway, and 2) to examine how capability differentiation shapes divergent economic outcomes among community enterprises. A qualitative multiple-case study approach was employed. Data were collected through in-depth interviews and non-participant observation with 15 key informants, comprising representatives of 12 One District One Product (ODOP) enterprises in handicrafts, food and beverages, and traditional herbal medicine, and three government officials. The data were analyzed using pattern matching and cross-case synthesis. The findings revealed that: 1) the Lao–China Railway reshaped opportunity structures by expanding market access and increasing tourism-related demand. However, these changes produced uneven economic outcomes across enterprises, reflecting three development pathways: expansion, survival, and stagnation, and 2) the study also found that differences in enterprise capabilities played a central role in shaping the ability of enterprises to respond to emerging opportunities. In several cases, enterprises with limited resources experienced a capability trap, which restricted their ability to benefit from changing economic conditions. Based on these findings, the study proposes the concept of “opportunity-led transformation,” which explains how enterprise capabilities condition the conversion of infrastructure-induced opportunities into divergent development outcomes. Therefore, policymakers need to implement capability-enhancement measures alongside transportation infrastructure development.