Unless it changes its policies, the U.S. will lose its status as the world's "preeminent innovator nation" this year and slip to sixth place by 2005, declares a study released Mar. 11 by the Council on Competitiveness, a Washington, D.C.-based group of business, labor, and academic leaders. The study, The New Challenge to America's Prosperity, includes a new Innovation Index that compares the technology leadership of 17 industrialized nations. Devised by Michael Porter, a professor at the Harvard Business School, and Scott Stern, his counterpart at Massachusetts Institute of Technology's Sloan School of Management, the index shows the U.S. was the top innovator country (followed by Switzerland, Japan, Sweden, and Germany) in 1995. But in 1999 the U.S. is projected to fall to third place -- behind Japan and Switzerland but ahead of Sweden and Germany. In 2005 Japan, Finland, Switzerland, Denmark, and Sweden are seen occupying the top five spots, with the U.S. dropping to sixth, and Germany seventh. In comments on the projections, the study notes that shifts in regulatory policy and rates of investment in R&D and education are propelling Scandinavian countries as leading innovation centers. Japan, the study adds, "has sustained a high and increasing level of investment in long-term innovative capacity" despite is macroeconomic difficulties. "At a time when U.S. competitiveness is the envy of the world," the study observes, the projected sharp decline of the U.S. in the rankings "may seem like an alarmist message. Yet the moment of greatest apparent success can be a nation's moment of greatest vulnerability. A concerted effort is needed now to renew the foundation for long-term U.S. competitiveness and prosperity."