It's also a popular myth that innovation only comes from small businesses and entrepreneurs. A huge amount of true innovation actually comes out of well-funded universities, businesses, and government projects.
I'm not really sure that's true. Bell Labs produced a whole lot of innovative research -- how much of that actually ended up being implemented by small companies instead of by large companies or open source projects?
The amount of innovative R&D that is implemented and commercially applied by large companies is nothing to sneeze at. Of course, the best examples of such behavior probably comes from outside the IT sector, in more traditional engineering disciplines (think e.g. car manufacturing (outside the US, maybe)).
37Signals, for instance, didn't really innovate. They didn't invent groupware or were nowhere near the first to commercially apply it. They simply built a product with the right levels of price, quality, and packaging that hit the right spot for a large number of people. This isn't as much innovation as it is market savvy and competitiveness.
This isn't to say that they aren't very important though, quite the contrary. Small businesses create vast amounts of wealth, and more often directly reward those who are responsible for it, rather than further lining the pockets of the super rich or bureaucrats.