Tennessee inventionINDEX July 2026: 1.41% (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).

Historical Tennessee inventionINDEX Scores

The Tennessee inventionINDEX score for the past 12 months is shown in the table below.

The July 2026 Tennessee inventionINDEX score registered at 1.41% with an A- rating, marking a slight contraction from June 2026 (1.53%, A+) and ending a five-month streak of consecutive A+ ratings that reached a peak of 1.78% in March 2026. Across the entire 61-month historical dataset from July 2021 through July 2026, the overall average index score stands at approximately 1.48%. The current July 2026 metric sits modestly below this long-term average and well underneath the record high of 1.87% set in July 2025, yet it remains significantly stronger than the historical floor of 1.07% (C+) observed in December 2021.

A longitudinal review across multi-year cycles demonstrates an encouraging macro trajectory, characterized by steady growth from 2021 through 2025. Annual average scores evolved from 1.38% in 2021 to 1.46% in 2022, holding at 1.40% in 2023, expanding to 1.48% in 2024, and peaking at an annual average of 1.59% in 2025. Even with the recent step down to 1.41%, the year-to-date average for 2026 remains solid at 1.54%, reflecting substantial structural progress over earlier historical periods like 2021 and 2023 when B-grade ratings occurred with far greater frequency.

High inventionINDEX scores and top-tier A+ grades yield significant strategic benefits for the state economy, signaling strong intellectual property generation, robust enterprise development, and efficient technology commercialization. Elevated metrics boost investor confidence, draw venture capital into regional startup ecosystems, and encourage corporate research expansion. Furthermore, superior index performance validates public and private investments in research institutions, helping Tennessee retain high-skilled technical talent while attracting innovative companies looking for growing markets.

In contrast, lower index scores and downgraded ratings expose underlying economic vulnerabilities, such as reduced corporate research budgets, slower patent application volume, or friction in technology commercialization pipelines. Prolonged periods of depressed metrics, such as the rating drops seen in late 2021 and early 2023, risk dampening capital investment, stalling business incubator growth, and causing regional innovation assets to underperform relative to national benchmarks. Addressing these dips requires targeted policy support, enhanced infrastructure funding, and strategic industry partnerships to reignite score progression.

Discussion:

In July, the Tennessee inventionINDEX scored a positive sentiment which was lower than the previous year’s average and underperformed the downward trend for the year. This is in contrast to the prior 12 months, which experienced a slight 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 Tennessee office provides R&D tax credit consulting and advisory services to Nashville, Memphis, Knoxville, Chattanooga, Clarksville, Murfreesboro, Franklin, Jackson, Johnson City and Bartlett

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.