For decades now in the software industry, when a company lacks for a legitimate criticism of its competitors' products, they level the charge that those competitors lack the ability to "innovate". So it was when Apple Computer alleged that Microsoft had stolen the idea of the GUI from Apple, when in fact Apple had purloined it from Xerox's PARC labs. When confronted with this fact, Apple did the obvious thing: They sued Xerox to assert hegemony over the desktop GUI. Unsurprisingly, Apple lost. As the Bard said, "Truth will out."
Most recently proprietary software vendors have made this assertion against Open Source. It is a specious allegation that deserves no attention whatsoever. Unfortunately, many in the Open Source movement have become distracted by this FUD.
The innovation chimera does provide a useful marketing tool to approach those easily seduced by "new and improved". Unfortunately, in the software business, "new and improved" often means change simply for the sake of change, with little real benefit and, in many instances, a reduction in usability and transparency.
Recent examples of questionable decisions in OSS projects include the KDE 4 attempt to eliminate folders from the desktop and Firefox 3's redesigned bookmarking system. Both are classic examples of "fixing what ain't broke". Although some small benefit may derive from the application of these new regimes, the cost is in relearning and lack of intuitiveness for those with prior experience. This is despite the fact these were relatively minor changes and only serves to illustrate the greater hazards assumed with less modest modifications.
It should be said that open software is not alone in susceptibility to this contagion. Both the ribbon interface in MS Office and the need for the Alt key to reveal the menu in IE 7 result from a blind pursuit of "innovation". Neither has done anything significant to enhance productivity and both have frustrated and confused experienced users.
Ultimately, while it certainly has its place in software development, innovation is a commodity that should be applied sparingly and cautiously to software. Those who develop for Open Source projects should not be befuddled by the desperate assertions of those threatened by the greatest innovation in the history of software development, the Open Source collaborative development paradigm, itself.