Well, technically, and theoretically, if there was no stigma associated with items, they would become stronger and thus more of an advantage to your win.
That is the common idea we want to believe but as many have noticed some items haven't really improved. Some even are head scratchers what or if anything is improved with each level.(example jetpack or emps) I've wanted to ask Kyle about at some point but then not really interested in the answer cause it most likely will be said its a project currently to be improved at a later date.
The few items i have at level 5 (max) are exacly the same as they were at level 1. It will probably be a later update after the bigger ones are taken care of.