Creative Destruction and the Golden Triangle: Evidence from the PSTR model

This research aimed to investigate the establishment of the golden triangle hypothesis, which emphasizes the importance of a balanced interaction between the state, civil society, and the market in fostering creative destruction and innovation. Data were collected from 107 countries and analyzed using Panel Smooth Transition Regression (PSTR) models. Two primary indexes were developed: the Golden Area Index, representing the area of the golden triangle for each country and year, and the Golden Difference Index, representing the standard deviation of the three indicators (state, civil society, and market) for each country and year. These were combined to create the Golden Threshold Index to comprehensively represent the golden triangle hypothesis. The estimation results, obtained for two groups of countries (all sample of 107 countries and a subset of 78 upper-middle and high-income economies), revealed that an increase in the Golden Area Index is associated with improved innovation growth and enhanced creative destruction. Conversely, an increase in disparity among the three pillars of the golden triangle leads to a decrease in innovation growth and a halt in creative destruction. Additionally, an increase in the Golden Threshold Index correlates with increased innovation growth and the facilitation of creative destruction. The study confirms the significance of the golden triangle hypothesis in promoting innovation and creative destruction. It highlights the necessity of maintaining a balanced interplay among the state, civil society, and market forces to foster an environment conducive to sustainable economic growth.