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).

South Dakota inventionINDEX Scores – Last 12 months

The South Dakota inventionINDEX for February 2026 reached a score of 1.07 percent, resulting in a solid A rating. This performance marks a notable improvement over the preceding month of January, which saw a dip to a C plus rating at 1.02 percent. Historically, the current score positions the state in a favorable light compared to the volatility observed over the last five years. While the index has not yet reclaimed the five-year peak of 1.20 percent recorded in February 2021, the current trajectory suggests a steady recovery and a return to the high-performance tiers that characterized much of 2024 and 2025.

When examining the 60-month historical trend, the index demonstrates significant resilience despite periodic fluctuations. The state reached its lowest point in February 2023 with a score of 0.96 percent and a D minus rating, representing a period of relative stagnation in innovation metrics. However, the subsequent rebound has been consistent, with multiple months in late 2024 and throughout 2025 maintaining scores above the 1.05 percent threshold. The current February 2026 rating of A serves as a testament to the state’s ability to navigate economic shifts and maintain a competitive edge in its intellectual and creative outputs.

Achieving a higher grade on the inventionINDEX, such as the current A or the frequent A plus ratings seen in 2021 and 2022, carries substantial weight for South Dakota’s economic reputation. High scores typically correlate with increased venture capital interest, a robust pipeline of new patents, and an overall environment conducive to entrepreneurial growth. These metrics signal to potential investors and business leaders that the region possesses the infrastructure and talent necessary to sustain high-level research and development. This virtuous cycle of innovation leads to job creation and higher wages, cementing the state’s position as a hub for modern industry.

Conversely, a decline into lower score categories such as the D or C ranges presents significant risks to the local economy. Lower ratings often reflect a slowdown in creative output or a lack of investment in emerging technologies, which can result in a loss of talent to competing regions. Such periods of stagnation can discourage startups and lead to a more conservative business climate that avoids the necessary risks for long-term growth. To ensure continued prosperity, it is vital to analyze the factors that led to the current A rating and implement strategies that prevent a slide back toward the historical lows seen in previous years.

Discussion:

In February, the South Dakota 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 slight 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 South Dakota office provides R&D tax credit consulting and advisory services to Sioux Falls, Rapid City, Aberdeen, Brookings, and Watertown.

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.