SOUTH DAKOTA INVENTIONINDEX | JANUARY 2026

January 2026: 1.02% (C+ grade)

South Dakota inventionINDEX January 2026: 1.02% (C+ 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).

South Dakota inventionINDEX Scores – Last 12 months

The South Dakota inventionINDEX for January 2026 stands at 1.02% with a C+ rating, marking a moderate start to the new year. This performance represents a slight dip from the robust 1.06% and A- rating observed in December 2025, continuing a pattern of month-to-month volatility seen throughout the five-year data set. When viewed against the historical peak of 1.20% achieved in February 2021, the current score suggests that while the state maintains a consistent baseline of inventive activity, it is currently operating below its maximum recorded capacity. The 60-month window reveals a recurring cycle where scores frequently oscillate between the 0.97% and 1.10% range, positioning the latest figure near the median of historical norms.

Higher grades, particularly the A+ ratings seen in months like April 2024 and August 2023, signal a thriving environment for intellectual property and technological advancement within the state. These elevated scores often correlate with increased confidence among local entrepreneurs and research institutions, leading to a surge in patent filings and heightened interest from venture capital firms. A high inventionINDEX score serves as a leading indicator of regional economic vitality, suggesting that South Dakota is successfully translating its research and development efforts into tangible intellectual assets. This momentum fosters a competitive atmosphere that attracts top-tier talent and encourages established industries to modernize their operations within state borders.

Conversely, a decline into the D range, such as the 0.97% recorded in October 2025 or the historical low of 0.96% in February 2023, presents notable challenges for the regional economy. These lower scores typically indicate a stagnation in the creative pipeline, where fewer breakthroughs are being formalized into protected intellectual property. Such downturns can lead to a reduction in investor confidence and a potential loss of talent if local innovators feel the infrastructure for protecting and commercializing their ideas is weakening. A sustained lower rating might suggest that the state’s innovation incentives are not keeping pace with national trends, potentially leaving South Dakota at a disadvantage in the broader race for technological leadership.

Maintaining a consistent upward trajectory remains essential for the long-term health of the South Dakota invention landscape. While the fluctuations between 2021 and 2026 demonstrate a resilient core of activity, the transition from an A- in late 2025 back to a C+ in early 2026 highlights the need for continued support of the innovation sector. Strategic focus on stabilizing these scores at or above the 1.05% threshold could ensure that the state remains a primary hub for new ideas and industrial growth. By analyzing these historical shifts, stakeholders can better understand the necessary conditions to drive the index back toward the record highs seen in previous years, ensuring a prosperous future for the state intellectual capital.

Discussion:

In January, the South Dakota inventionINDEX scored a positive sentiment which was lower than the previous year’s average and underperformed the upward trend for the year. This is in contrast 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.