August 2025: 3.24% (A grade)

Arizona inventionINDEX August 2025: 3.24% (A grade)

The inventionINDEX measures innovation output by comparing GDP growth with patent production growth. 

Anything over C grade is positive sentiment; anything under C is negative outlook/sentiment. Using that sentiment, it is possible to observe trends over time, and also compare states/countries. In doing so, we can predict which states have the best chance to recover economically from the pandemic (or any other economic incident that may occur).

Arizona inventionINDEX Scores – Last 12 months

The historical data for the Arizona inventionINDEX over the last 60 months reveals a landscape of dynamic innovation, marked by both peaks of high performance and periods of lower scores. The average inventionINDEX score during this five-year span was approximately 2.83%, a benchmark against which all monthly results can be measured. The most recent score of 3.24% in August 2025 compares favorably to this historical mean, suggesting a strong end to the period. However, the data also shows significant fluctuations, from a high of 7.25% in January 2024 to a low of 1.44% in July 2023. These variations underscore the cyclical nature of innovation and economic momentum. A closer look at the ratings shows that ‘A+’ is the most frequent rating, highlighting Arizona’s consistent capacity for innovation over time.

A higher inventionINDEX score and its corresponding favorable rating are often a clear indicator of a thriving innovation ecosystem. When the score is high, it reflects a strong climate for new ideas, patents, and business creation, which are crucial for economic growth. A strong ‘A+’ or ‘A’ rating can attract significant capital investment and draw skilled professionals and entrepreneurs to the state. This influx of talent and resources can create a virtuous cycle, further boosting the state’s capacity for groundbreaking inventions and securing its position as a leader in key industries. Such a positive reputation can lead to increased job opportunities, higher wages, and a more diversified, resilient economy.

Conversely, a lower inventionINDEX score, such as the ‘C+’ rating seen in July 2023, can signal underlying challenges within the state’s innovative capacity. A low score may suggest a slowdown in new venture creation, a decline in research and development funding, or difficulty in retaining top-tier talent. The negative implications can extend beyond a single month’s rating, potentially making the state less attractive to new businesses and investors who seek environments of sustained growth. A consistent trend of lower scores could hinder Arizona’s long-term economic competitiveness and slow the pace of technological advancement, ultimately impacting the state’s ability to compete on a national and global scale.

In conclusion, the inventionINDEX serves as a vital barometer for Arizona’s innovation health. The historical data, with its notable highs and lows, shows that the state has a strong baseline for innovation, but also that this success is not guaranteed and requires continuous nurturing. Maintaining a high score is essential for future economic prosperity, as it directly correlates with attracting investment, fostering talent, and solidifying the state’s reputation as a hub for groundbreaking ideas. By closely monitoring this index, policymakers and business leaders can proactively address challenges and capitalize on opportunities to ensure Arizona’s continued success in the innovation economy.

Discussion:

In August, the Arizona inventionINDEX scored a positive sentiment which was higher than the previous year’s average but underperformed the upward trend for the year. This is in contrast to the prior 12 months, which experienced a downward trend. 

As the economy continues to stabilize in the post-pandemic era, it remains uncertain whether any backlog of applications still exists or if the department has returned to normal processing timelines. The inventionINDEX could also be affected by lingering consequences from the pandemic, such as company closures, reduced workforces, and limited R&D capabilities, which may still be impacting current operations.

Learn More:

Are you thinking of patenting any of your bright ideas? Did you know your research work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? To find out more, please check out our free online eligibility test.

Swanson Reed’s Arizona office provides R&D tax credit consulting and advisory services to Phoenix, Tucson, Mesa, Chandler, Glendale, Scottsdale, Gilbert, Tempe, Peoria and Surprise.

Feel free to book a quick teleconference with one of R&D tax specialists if you would like to learn more about R&D tax credit opportunities.

Who We Are:

Swanson Reed is the largest Specialist R&D tax credit advisory firm in the United States. With offices nationwide, we are one of the only firms globally to exclusively provide R&D tax credit consulting services to our clients. We have been exclusively providing R&D tax credit claim preparation and audit compliance solutions for over 30 years. 

Swanson Reed hosts daily free webinars and provides free IRS CE and CPE credits for CPAs.  For more information please visit us at www.swansonreed.com/free-webinars or contact your usual Swanson Reed representative.