ALABAMA INVENTIONINDEX | DECEMBER 2025

December 2025: 1.78% (A+ grade)

Alabama inventionINDEX December 2025: 1.78% (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).

Alabama inventionINDEX Scores – Last 12 months

The Alabama inventionINDEX closed the 60-month period ending in December 2025 on a high note, reaching a score of 1.78% and an A+ rating. This current standing is notably stronger than the five-year average of approximately 1.38%, positioning the state’s innovation climate in the upper echelon of its historical performance. While the index reached a peak of 2.15% in early 2024, the recent score represents a significant recovery from the volatility seen just one month prior, when the rating dipped to a D+. This cyclical pattern suggests that while Alabama faces periodic contractions in invention activity, the long-term trajectory maintains a resilient baseline that frequently returns to elite performance levels.

A higher grade such as the current A+ rating serves as a vital indicator of a thriving intellectual and economic ecosystem. When the inventionINDEX sustains these elevated levels, it typically reflects an increase in patent filings, a surge in research and development funding, and a high volume of new technical disclosures. These outcomes provide a competitive advantage by attracting venture capital and high-tech industries to the region, which in turn fosters high-paying job creation and infrastructure development. A consistent A+ rating reinforces Alabama’s reputation as a hub for creativity, ensuring that local breakthroughs have the necessary momentum to transition from concept to commercial reality.

Conversely, the historical presence of lower scores, such as the 0.86% lows recorded periodically over the last five years, highlights the negative implications of a stagnant innovation pipeline. A lower grade often signals a reduction in the pace of discovery or a lack of institutional support for new ideas. When these scores persist, the region risks a “brain drain” where top-tier talent migrates to more active innovation hubs, leading to a long-term erosion of the state’s technical expertise. Furthermore, lower ratings can deter potential investors who perceive a lack of growth opportunities, potentially stalling the diversification of the state’s economy and leaving it vulnerable to shifts in traditional industries.

Reflecting on the full 60-month dataset, the Alabama inventionINDEX demonstrates a robust ability to rebound from downturns, maintaining an A+ rating in over one-third of the observed months. The fluctuations between the D+ and A+ ranges underscore the importance of consistent policy and investment to smooth out the volatility of the innovation cycle. By finishing the year 2025 at 1.78%, Alabama enters the next phase of its economic development with strong momentum. Sustaining this level of output will require a continued focus on supporting the academic and private sectors to ensure that the state remains at the forefront of the national intellectual landscape.

Discussion:

In December, the Alabama inventionINDEX scored a positive sentiment which was higher than the previous year’s average and outperformed the downward trend for the year. This is similar 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 Alabama office provides R&D tax credit consulting and advisory services to Birmingham, Montgomery, Mobile, Huntsville, Tuscaloosa, Hoover, Dothan, Auburn, Decatur and Madison.

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.