Innovation haven't stopped but there is a limit of how fast you can improve. I am not talking about innovation saturation as some of us did here, there are still new people to sell ereaders to. The thing is technological improvements at a neck breaking speed only only occur when there is a clear and pronounced demand for it. Like saying "we want soft, nice lights in our ereaders."
eReaders are mostly matured. Lets talk about my almost two years old Kobo Glo:
- Resolution is sufficiently high. Recent studies have indicated that the unaided human eye can generally not differentiate detail beyond 300 PPI. 2 years old Kobo Glo has a 212 PPI screen. It is good, more than good even.
- Device size is just about right for many people. I live in a somewhat cold part of our world, therefore I gathered tens of coats, jackets, raincoat over the years. Kobo Glo fits in their pockets almost perfectly. A little bigger, and it would have began to have problems with some of them. I only have one suit but it fits into its pocket just perfectly too. I would not buy a 8" ereader. That would be a bag device.
- Light is very good too. Right now I have one paperback, one trade and Kobo Glo open. Kobo Glo beats them all in presenting a clear page with nice contrast.
- Speed is very good too. I tap the page, and it changes. It changes faster than I could change a page in an usual book.
More examples could be given but it is clear that there is not that much demand and need for innovation as there were in the times of Nook with a LCD mini screen and Kindle with a keyboard. So of course innovation would be a lot slower too.
If a company releases a eReader with a 350 PPI screen thus easily reaches natural limit of my eyes, I wouldn't buy it. For example, I haven't bought Kobo Aura yet and I can't figure out a reason why I should. Aura has a 20% faster processor and (in my humble opinion) a better design. So what? I don't really believe that %20 speed increase would really matter and while better design might be a reason for buying (sometimes I think that I am becoming a slave to nice designed things; I can't even remember how many wallets or coffee cups I bought for design alone, paying as much as an ereader sometimes), I have decided to wait for overall better tech too.
So, there is
innovation; new screens, faster speeds, less ghosting... But taken at their one at a time speed, they would not make anyone but the enthusiast buy ereaders. Therefore spending greats amounts of resources in R&D would simply be bad management.
You just wait. Innovations are coming one by one. One day we will check our local tech store and realize that there is a much better ereader out there, and then we will buy it.