The problem was caused by the Windows shortcuts (.lnk files), which are used as symbolic links, created by MontaVista in 2006 not correctly being resolved.

The first issue that at some point in time the shortcut resolution mechanism of cygwin changed and the current cygwin version 3.6.4-1 can not correctly resolve the old-style shortcuts created in 2006 as links. Thus, I switched back to cygwin version 2.10.0-1 available on the cygwin time machine. This resolved the issue on my local system.

However, when working with Windows containers there were several issues with the file attributes missing due to the file system being used by docker. I initially tried to unzip the ZIP archive into the container file system during the build phase so that the container would start as fast as possible and be self-contained. However, the shortcut resolution did not work due to issues with the file attributes. Thus, as a fix given that the container is an intermediate solution while modernising the build process, I decided to mount the unzipped directory containing the compiler using docker's -v option: docker run --rm --name mips-build -v C:\xyz\resources\MontaVista:C:\MontaVista mips-build:0.0.0.

However, the compiler needs to be located inside the "D: drive". Thus, I created a symbolic link as part of the CMD instruction within the Docker file:

CMD [ "C:\\cygwin64\\bin\\bash.exe", "--login", "-i", "-c", "ln -s /cygdrive/c/montavista/ /cygdrive/d/MontaVista", "&&", "..." ]