1. There actually is quite a bit of innovation on teaching regarding topic coverage - both the development of new courses and the updating of content in existing courses. That type of professionalism is quite strong among the faculty.
2. Faculty get time off periodically (sabbaticals) to recharge their engines. This recharging helps both research and teaching.
3. Certain professional programs value teaching quite highly as part of the faculty member contribution. The Performing Arts come to mind. Here's a different example from the College of Business where the Accounting Department has a Project Discovery that really emphasizes good teacing.
4. The Accounting example brings to mind the issue of whether there are sufficient revenue flows in the system to provide good incentives for teaching. In Accountancy, there is a requirement of 150 credit hours to sit for the CPA exam. Many students who fill that requirement do so by getting a Masters degree. That 5th year of school is then at a tuition rate like MBA, about 3 times the undergrad rate, often with the future employer footing the bill. Spending resources on the junior and senior year then can be rationalized as a feeder for that program. It is harder to have good incentives for teaching when the revenues are low.
5. Teaching at the undergraduate level, there is quite a difference in teaching majors from teaching required gen ed classes. Motivation likely varies a lot across those student pools. So might class size. So there is some substantial incentive in how course assignments are done. Faculty expertise matters with that, but other factors count too. Faculty like to get the courses they want, not the courses they are assigned. (And in that are just like everyone else.)
6. Likewise, the mixture of undergraduate and graduate teaching has an incentive to it.
All that said, I believe it is correct to maintain that incentive for process change in teaching is weak, as a rule, but there are exceptions. In Library and Information Science, when faculty develop their course for their online Masters program (called LEEP) they get a one course reduction in teaching load to ahve the time to adequately develop the online version. Course reductions of this sort means somebody else has to teach the course, at an added cost to the unit. The prior comment about sufficient revenues matters here.
We didn't talk at all about non-tenure-track instructors, of which there are many on campus. Their incentives are quite different because teaching is frequently the main part of their job. They are disproportionately teaching the large intro courses and gateway courses into the discipline. Job security is a big deal for them and student satisfaction matters there. So these instructors have a strong incentive to produce good student satisfaction. Once they have a track record for that, these same instructors become very risk averse to innovation that might adversely affect student satisfaction.
I hope this helps complete the picture. It is not as simple as I may have indicated in class.