ALABAMA INVENTIONINDEX | JULY 2025

July 2025: 1.65% (A+ grade)

Alabama inventionINDEX July 2025: 1.65% (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

Based on the historical table for the past 60 months, the Alabama inventionINDEX demonstrates a pattern of both significant highs and notable lows. The most recent score in July 2025 stands at 1.65%, earning a top-tier A+ rating. This marks a strong recovery from a temporary dip in June 2025, which saw a score of 0.99% and a C- rating. Over the last five years, the index has shown considerable volatility, with a peak score of 2.15% in January 2024 and several instances where the score has fallen below the 1.0% mark, such as in November 2024 and October 2022. This cyclical performance highlights the dynamic nature of innovation within the state over time.

A higher inventionINDEX score and a corresponding top rating, such as A or A+, signify a robust and thriving innovative ecosystem. These strong performances, like the consistent A+ ratings seen throughout the first half of 2024, suggest that the state is experiencing a period of accelerated growth in patent activity relative to its GDP. Such results can lead to positive outcomes including increased venture capital interest, a higher number of new business formations, and the attraction of a skilled, technical workforce. These ratings are often a reflection of effective policies that support research and development, collaboration between industry and academia, and a general environment conducive to entrepreneurial success.

Conversely, a lower inventionINDEX score, such as the C- and D+ ratings observed in several months, carries potentially negative implications. A score in this range may signal a slowdown in innovation, suggesting a period where the rate of patent production is not keeping pace with economic growth. This could point to challenges such as a decrease in research funding, a flight of talent to other states, or a less favorable climate for startups. Sustained lower ratings could ultimately hinder long-term economic competitiveness and slow the diversification of the state’s economy, making it a critical metric for policymakers and business leaders to monitor.

In summary, the 60-month history of the Alabama inventionINDEX illustrates a landscape of fluctuating performance. While the state has shown its capacity for exceptional periods of innovation, evidenced by the numerous A+ ratings, it also experiences downturns that warrant careful consideration. The scores provide a useful barometer for the health of the innovation economy, with high ratings indicating a positive outlook and lower scores serving as a warning sign. The data underscores the importance of a proactive approach to fostering a stable and continuously improving innovative environment.

Discussion:

In July, the Alabama inventionINDEX scored a positive sentiment which was higher than the previous year’s average and outperformed 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 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.

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