This article focuses on how sectoral systems of innovation and production in the same industry but across countries may evolve differently after facing similar threats and opportunities caused by the same external factor. To elaborate on this, we will use the case of evolution of the automotive sectors in Thailand and Vietnam, and their dynamics and transformation when they are facing threats and opportunities from their fierce competitor, China. The findings illustrate that different sectoral systems of innovation and production evolve differently. The direction and the pace of evolution depends very much on existing absorptive capabilities of agents, strength of their linkages, and their process of collective learning to withstand the threats and exploit opportunities.
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