Director of the IMD World Competitiveness Center Professor Arturo Bris said a consistent commitment to a favourable business environment was central to Hong Kong's rise.
"The US still boasts the best economic performance in the world, but there are many other factors that we take into account when assessing competitiveness," Bris said.
Bris said there are a number of factors which influence a country's ranking.
"The common pattern among all of the countries in the top 20 is their focus on business-friendly regulation, physical and intangible infrastructure and inclusive institutions."
Western European economies have also continued to improve, with researchers highlighting the ongoing post-financial-crisis recovery of the public sector as a key driver for rank influence, he said.
Top competitive rankings in 2016:
• Hong Kong - 1st, up from 2nd in 2015.
• Switzerland - 2nd, up from 4th in 2015.
• US - 3rd, down from 1st in 2015.
• Australia - 17th, up from 18th in 2015.
• New Zealand - 16th, up from 17th in 2015.
