"It's my opinion that stereo reached it's pinnacle around 1986 or so. After that mfg's of stereo equipment started to gear up their R&D departments for home theater stuff. Stereo then just became a sideline and no further R&D was done in that area."
A lot of this depends on the company in question. There are still companies doing active research and development. Whether or not they actually move the state of the art forward is, of course, another question. I've heard arguments on both sides.
But--and this is a huge but--interest in stereo has become mainly the interest of smaller companies. And many of these companies have branched out heavily into home theater. NAD is one good example--they still are active with stereo, and they regularly get good reviews. But they have also have a home theater line.
Unfortunately, it appears that some electronic component research has, I've heard, stalled because of home theater. For example, parts of CD players have, historically, been engineered by big names, who have the resources a small company does not have. (In fact, at one time, many audiophile companies made a CD player by taking a Phillips player, and heavily modifying the design, particularly the analog stage and power supply!) With DVD and home theater, the interest in further research and development has apparently been dying off.