Technology spending may be softening in many parts of the world as the credit crunch bites, but the longer term fundamentals of IT industry competitiveness remain constant. An innovation-friendly culture, a steady flow of talent, advanced technology infrastructure, a robust legal regime, well-balanced government support and an open business environment are all vital factors that enable a country's IT producers to thrive.

As far as Eastern Europe is concerned, the ranking is as follows: 1. Estonia, 2. Slovenia, 3. Hungary, 4. Czech Republic, 5. Slovakia, 6. Poland, 7. Latvia, 8. Lithuania, 9. Romania, 10. Croatia (newcomer), 11. Bulgaria, 12. Russia, 13. Ukraine, 14. Kazakshtan, 15. Azerbeijan etc.

The United States ranks first in the world in 2008, maintaining its top position from the previous year, the Budapest Business Journal reports.

As an incubator of high-tech start-ups and technology innovation and as a developer of talent, the US remains second to none. “However, there is no room for complacency, as three new countries -Taiwan, Sweden and Denmark - move into the top five this year, displacing others such as Japan and South Korea. IT industry environments elsewhere in Europe and Asia, including in emerging markets, are also becoming more competitive," the EIU said on Tuesday.

Investing in people is mission-critical. Sourcing talent will be among the toughest challenges IT producers will face in the coming years. The US, Singapore and UK provide the best environments for human-capital development among the index countries. The brain drain of IT talent from emerging markets shows signs of slowing or reversing, however, and the US and other leaders will need to work hard to remain magnets for the world's IT talent.

East Asia boasts the strongest R&D environments. Dynamic innovation, supported by a strong R&D environment, is a major contributor to IT industry competitiveness. Taiwan, South Korea and Japan remain the index leaders when it comes to the R&D environment for technology production. All are prolific generators of technology patents, and its firms and governments are heavy R&D spenders.

Glottalization and the Internet will “liberate" R&D. Ecosystems similar to America's Silicon Valley—bringing together talent, technology, venture capital and good universities, supported by a risk-taking ethos—will remain the best incubators of IT innovation. Internet-driven collaboration will partly level the playing field, however, facilitating companies' access to skilled IT innovators and researchers wherever they are located.

Competitive broadband markets help cultivate strong IT sectors. Without fast, reliable and secure Internet access, technology firms cannot interact effectively with partners nor can they sell their services online. IT industries in the index top tier all derive substantial benefit from the high-quality networks developed through competition, but more telecoms liberalisation is needed in less developed regions to spur infrastructure development.

Legal regimes are slowly improving. The US, Australia and west European countries retain the world's most effective systems of intellectual property (IP) protection and the most developed bodies of e-commerce and cybercrime law. But progress in bolstering legal regimes is also being made in tough places such as China, which in recent years has updated its IP and e-commerce legislation and improved enforcement.

Governments must let market forces operate. To support the development of local IT production, policymakers' best efforts are aimed at improving education, skills development, and the financing and legal environments. E-government development and a proactive broadband strategy also help, as can calibrated support for innovation. Trouble often comes, however, when governments try to champion specific companies or technologies.

The overall top 10 countries are:
1.USA
2.Taiwan
3.UK
4.Sweden
5.Denmark
6.Canada
7.Australia
8.South Korea
9.Singapore
10.Netherlands