Really interesting cover story from the Jan 12 issue of BusinessWeek.
With it's alternate title for the web of "Whatever Happened to Silicon Valley Innovation?" the story looks at the current environment of technology innovation and how it compares to the past.
The simplistic (but, still open for debate) answer is that it's lagging as companies focus less on basic science and "fundamental breakthrough" research and more on incremental innovation. Additionally, the idea of going public as a goal is implicated by the article as a cause for concern. The reason being is that this approach favors a more short-term view of the company and can limit the chance for big game-changing innovations.
Related to these concepts, an examination is made of the hottest private Silicon Valley tech companies. Right now some the firms generating the most attention are Facebook, Digg and Twitter... all social networking ventures. Social networking is a huge growth area and shouldn't be discounted, but it's also a fair question to ask whether it's emergence is as profound as actual breakthrough technologies around hardware (either broad categories like computer processing power or specific technology like the iPod or iPhone from Apple).
Interesting questions raised by the article... which also links here to a full-chapter excerpt from a book on the topic titled "Closing the Innovation Gap". Written by Judy Estrin... formerly the CTO at Cisco Systems and now an advisor to President-elect Barack Obama, it examines further this notion of short-term focus on the part of US companies... and investors in them.