WASHINGTON • South Korea returned to first place in the latest Bloomberg Innovation Index, while the US dropped out of a top 10 featuring a host of European countries.

South Korea, which regained the crown from Germany, has topped the index for seven of the nine years it has been published. Singapore and Switzerland moved up one spot to rank second and third.

The index analyses dozens of criteria using seven equally weighted metrics, including research and development (R&D) spending, manufacturing capability and concentration of high-tech public firms.

The 2021 rankings reflect a world where Covid-19 has brought innovation to the fore - from government efforts to contain the pandemic to the digital infrastructure that has allowed economies to work through it, to the race to develop vaccines.

WUHAN BREAKTHROUGH

Much of the Bloomberg data comes from before the virus crisis. Still, it is notable that many countries high on the index - like South Korea, Germany and Israel - have been world leaders in some areas of fighting the pandemic, whether contact tracing or vaccination.

US names like Zoom or vaccine maker Pfizer are among the past year's emblems of innovation.

The pandemic has also spotlighted a different kind of breakthrough, one more to do with policy and organisation than technology or research, said Nobel Prize-winning economist Paul Romer.

"We should recognise that the available metrics miss important dimensions of innovation," he said. "Officials in Wuhan showed for the first time that in a couple of weeks, it is feasible to test 10 million residents of a city for the coronavirus. This was a very important public health innovation."

IMPORTANCE OF R&D

South Korea's return to the top spot is mainly due to an increase in patent activity, where it ranks top, alongside a strong performance in R&D and manufacturing.

There is near-total agreement in South Korea that "R&D is essential" to having a future, said business professor Lee Kyung-mook of Seoul National University.

Second-placed Singapore, which has been allocating funds to help workers and firms transition to a digital economy, also scores high for manufacturing and its globally competitive universities put it top of the tertiary education gauge.

Germany's loss of the crown follows a warning two years ago that the country lacked skilled workers and a proper strategy for next-generation technology.

U.S. PERFORMANCE

The US, which topped the first Bloomberg Innovation Index in 2013, dropped two places to 11th.

The country scores badly in higher education, even though US universities are world-famous. That under-performance was likely made worse by obstacles to foreign students - first due to Trump visa policies, and later to the pandemic.

Mr Sung Won Sohn, an economist at Loyola Marymount University, says the US is still in the vanguard but its innovations now tend to come from smaller firms and take longer to reach the consumer.

China, down one place to 16th, is locked in a battle with the US over innovation policy. Its economy has gained ground on rivals with a faster recovery amid the pandemic. But its fall reflects longer-term issues such as the erosion of value-added manufacturing.

BLOOMBERG