Innovation is no longer a competitive advantage—it’s a prerequisite for survival. That's why Forbes is launching America's Most Innovative Large Companies, debuting August 25.What does it mean for a company to be innovative? Forbes’ upcoming data-driven list uses objective metrics to create an Innovation Index, which measures a company's true innovation output based on patents and IP, R&D focus, investor confidence, return on equity, reputation and AI evaluation.The result is a final list of 100 firms that are out-performing the pack, transforming their businesses and their industries. For each measure, we controlled for industry where appropriate and adjusted extreme outliers that would have an outsized effect on the overall Index.Here are the methodology’s highlights:Population: Companies in the Standard & Poor’s 500 list, trading on the New York Stock Exchange and the NASDAQ. This list contains the largest companies trading on those exchanges.The Innovation Boost : We analyzed the difference between a company’s book price—the actual value of its assets minus its liabilities—and its market valuation. This difference captures investors' confidence that a company is poised to do great things in the relatively near future.Also known as PBV (Price-to-Book Value), the ratio was calculated using the work of acclaimed professor Aswath Damodaran at the New York University Stern School of Business. We then accounted for the performance of the companies’ industries as a whole, based on his tracking by industry, comparing each company to others in its industry to identify those that were out-performing their peers, rather than those that were just being swept along by market confidence in a particular line of business. The IP Activity Score (IPQwery): Calculated by new Forbes data partner IPQwery, a leader in the IP tracking field, this metric measures a company’s work in creating and maintaining its intellectual property, including patents and citations, trademarks, and the strength of a company's defense of its IP.R&D Focus: A measure of spending on research and development as a percentage of annual sales, based on company financial filings. Because R&D spending tends to be front-weighted at the start of a company’s lifespan, we weighted this value based on the age of the company.Return on Equity/ROE: While not innovation-specific, ROE is essentially a measure of how efficient a company is with its spending, tracking how effectively a company uses its shareholder equity to create value. This metric balances out the R&D Focus numbers, essentially giving a boost to those companies that make good use of their spending.Media and Social Media Coverage and Sentiment Related to Innovation (SignalAI): Forbes data partner and media intelligence firm SignalAI provided us with sentiment analysis of millions of traditional and social media posts specifically related to innovation across 226 countries and more than 120 languages, which we used to create a polarity index for each company. This is a true, comprehensive measure of popular sentiment, genuinely and organically posted, about each company’s approach to innovation.AI Audience Reaction Innovation Index (Kumkuat AI): In perhaps the most exciting piece of the index, we relied on the work of new data partner and audience intelligence platform Kumkuat AI. They created artificial "audiences" for us in five groups: consumers, investors, employees, customers and industry experts.Synthetic "raters" in each group were asked to evaluate thousands of real-life product launches, announcements and other events using a huge collection of documents—press releases, earnings call transcripts, leadership postings and the like. For each event, they answered three questions: How significant is this? How likely is it to succeed commercially? And how hard would it be for a competitor to copy it? Their answers, a measure of the companies’ actual investments and leadership's narrative about those efforts, were combined and indexed, resulting in a final score assigned to each company by Kumquat AI to value its real-world efforts.Scoring: Each company received an individual category score that was normalized and, when appropriate, adjusted to reflect how that compared to competitors in their sector (or for other factors as identified above). Those scores were then combined to create the Innovation Index, which was ranked from No. 1 to No. 100 most innovative.We’re proud to present the Innovation Index and the final list on August 25.As with all Forbes lists, companies do not pay any fee to be considered or selected.