The reason technology did not advance in Middle Earth is because innovation was not rewarded. Innovation and experimentation were punished.
Mine a little too deeply? You awaken a balrog that kills you an everyone you have ever known.
Want to expand into that verdant area across the river? You didn't expect giant spiders, did you?
Build a disruptive startup and bank $50B? You'll hear dragon wings a-flappen.
Middle Earth was not filled with innovative disrupters because the risk and reward equation strongly discouraged innovation.