Ireland has gained three places on the IMD World Competitiveness Ranking Scoreboard, rising to 17th overall.
The annual report, which measures how well countries manage their economies and workforce, ranked Ireland above the United Kingdom (18th), France (28th) and China (21st).
The USA was ranked first, having been listed in second place last year.
Switzerland rose from third to second place, while Hong Kong slipped from the top spot to third most competitive.
IMD said the US had regained the lead due to a revival in its financial sector and the success of its technology companies.
The Swiss-based business school said the success of leading European economies was based on export-oriented manufacturing, a diverse range of activity, fiscal discipline and a strong SME sector.
The IDA welcomed Ireland’s improved position and said that the country had also improved in areas like growth and inflation.
The agency said Ireland also ranked first for investment incentives, attitudes to globalisation and for flexibility of the workforce.
