New Zealand has moved up two rankings to 13th out of 141 countries in the 2012 Global Innovation Index.
Widely seen as an indicator of national competitiveness, the index is prepared by the European Institute of Business Administration, (leading business graduate school Insead and the World Intellectual Property Organisation).
It ranks New Zealand third in the Asia and Oceania region behind Singapore and Hong Kong.
Switzerland, Sweden and Singapore top the overall rankings while New Zealand had a very similar score to Canada, Norway, Germany and Malta. Australia was placed 23rd on the index.
''This shows that although we may not have the size or population of those countries, it's the quality of our people, their ideas, and the regulatory and business environments that are helping make a positive difference,'' said Science and Innovation Minister Steven Joyce.
The report on the rankings said the global economic recovery was fragile and uneven across different regions with most current economic forecasts predicting a slowdown of GDP growth throughout the rest of this year and uncertain recovery next year.
In this context, there's renewed debate on economic policy that fosters growth and employment.
''Although innovation can't cure the most immediate financial difficulties, it is a crucial element of sustainable growth,'' the report said.
Past crises in the 1990s are said to have generated new strings of innovative companies and may have put entire nations - such as Finland and Korea - on a new growth path, the report said.
But total business research and development spend has declined in recent years, including a 1.9 per cent drop in R&D spending from the world's most innovative countries.
The index was launched in 2007 by Insead with the goal of measuring innovation in society beyond the traditional metrics of the number of published research articles and the level of R&D expenditures.