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).

Kentucky inventionINDEX Scores – Last 12 months

The Kentucky inventionINDEX for February 2026 reached 0.88 percent, earning a D rating. While this represents a marginal improvement over the 0.85 percent recorded in January, the state remains within a challenging tier of performance. Over the final quarter of 2025 and into the start of 2026, the index has largely stagnated below the 1.00 percent threshold, indicating a period of restricted inventive output or reduced economic momentum in the innovation sector. This current standing reflects a modest recovery from the November 2025 low of 0.84 percent, yet it suggests that the regional innovation ecosystem is currently struggling to regain its previous footing.

When viewed against the broader sixty-month historical backdrop, the current score reveals a significant decline from past peaks of excellence. In August 2021, the index achieved its highest point of 1.26 percent with an A- rating, demonstrating the state’s capacity for high-level intellectual property development and commercialization. Another notable high occurred in August 2023 at 1.14 percent with a B rating. However, the trajectory since mid-2024 has been predominantly downward or horizontal, with the most recent twelve months failing to produce a single rating in the B or A range. The persistence of D and C- ratings throughout 2025 highlights a departure from the more robust middle-tier stability seen during 2022 and early 2024.

Achieving a higher grade on the inventionINDEX carries substantial positive outcomes for Kentucky’s economic landscape. A shift toward the B or A categories typically signals an environment ripe for venture capital investment and the successful conversion of research into marketable products. Higher scores correlate with increased patent filings, a more vibrant startup culture, and the attraction of high-tech talent from outside the region. When the index rises, it reflects a synergy between academic institutions and private industry, fostering an atmosphere where breakthrough technologies can thrive and contribute to long-term wealth creation for the commonwealth.

Conversely, the current trend of lower scores presents several negative implications for the state’s competitive edge. A sustained D rating suggests a potential brain drain where innovators seek more supportive environments elsewhere, leading to a loss of human capital. It may also indicate that the pipeline for new inventions is narrowing or that existing intellectual property is not being adequately commercialized. If the index continues to hover near the 0.80 percent range, similar to the April 2023 low of 0.82 percent, the state risks falling behind regional peers in the race for future-proof industries. Addressing these deficits is essential to ensure that Kentucky does not remain trapped in a cycle of innovation stagnation.

Discussion:

In February, the Kentucky inventionINDEX scored a negative sentiment which was lower than the previous year’s average but outperformed the downward trend for the year. This is in contrast to the prior 12 months, which experienced an upward 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 Kentucky office provides R&D tax credit consulting and advisory services to Louisville, Lexington, Bowling Green, Owensboro, Covington, Richmond, Georgetown, Florence, Hopkinsville, and Elizabethtown.

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.