Key Takeaways: inventionINDEX

  • The Metric: Benchmarks innovation efficiency by comparing Patent Filing Growth vs. GDP Growth.
  • The Baseline: 1% (1.00) is the neutral pivot point. A score of ~1% indicates equilibrium (Grade C).
  • The Scoring:
    • > 1.30%: High Innovation (Grades A/B).
    • < 0.90%: Stagnation or Decline (Grades D/F).
Swanson Reed inventionINDEX: Methodology & Examples

The Swanson Reed inventionINDEX measures innovation output by comparing GDP growth with patent production growth. This guide details the calculation methodology, utilizing 1% (1pc) as the baseline “C” grade.

Understanding the “1%” (inventionINDEX)

The “1%” baseline refers to the inventionINDEX, a normalized metric of innovation efficiency. It is calculated by dividing the number of utility patents granted by the state’s Gross Domestic Product (GDP).

$$ \text{inventionINDEX} = \frac{\text{Utility Patents Granted}}{\text{State GDP}} $$
Component Source Purpose
Patents USPTO Data Measures raw innovation output (Utility patents granted).
GDP FRED / St. Louis Fed Measures state economic size to normalize data.

This calculation ensures that larger economies do not automatically appear more innovative simply due to scale.

Baseline Trendline Methodology

Once the inventionINDEX values are determined for historical years, a Linear Regression model is used to project the expected baseline performance (Trendline).

$$ Y = Mx + C $$
  • \( Y \) (Baseline Value): The calculated expected inventionINDEX.
  • \( M \) (Gradient/Slope): The average annual rate of change.
  • \( x \) (Time Period): The year or time interval.
  • \( C \) (Y-Intercept): The starting value of the trendline (where \( x=0 \)).

State Calculation Examples

The table below displays the Linear Regression parameters (\( M \) and \( C \)) applied to sample states:

State Slope (\( M \)) Intercept (\( C \)) Methodology Notes
Arkansas (AR) \( 7.60 \times 10^{-5} \) \( 0.0044 \) Uses a recent 13-year trend to project baseline.
Colorado (CO) \( 2.17 \times 10^{-3} \) \( -0.0250 \) Uses specific historical window to establish trend.
Delaware (DE) \( 4.88 \times 10^{-5} \) \( 0.0215 \) Standard regression model.
Georgia (GA) \( 2.89 \times 10^{-5} \) \( -0.0170 \) Standard regression model.
Grading Scale & Interpretation

The index uses 1% as the neutral baseline. The score (A to F) is determined by comparing the calculated “Index %” against the threshold.

Grade Index Threshold Numerical Value Sentiment / Outlook
A+ ~ 1.50% + 10 High Innovation: Innovation significantly outpaces the economy.
C 1.00% 5 Neutral: Innovation grows in lockstep with the economy (Equilibrium).
D < 0.90% 2 Stagnation: R&D spending slows; innovation lags behind GDP.
F Negative / Low -2 Severe Decline: Warning sign for future competitiveness.
Real-World Scenarios

To generate the index, analysts compare the rate of new patent filings against the rate of GDP growth over a 12-month rolling period.

Scenario Example State Patent Growth GDP Growth Resulting Index Grade
High Innovation North Carolina High (+4.5%) Moderate (+2.5%) 1.83% A+
Equilibrium Ohio Steady (+2.0%) Steady (+2.0%) 1.00% C
Stagnation Connecticut Low (+0.5%) Steady (+2.0%) 0.88% D
Severe Decline Nevada Negative (-3.0%) Booming (+4.0%) -0.75% F