An interesting peripheral discussion has broken out in various places around the Internets following the Yahoo stop to remote work. Ignoring for a moment the pros and cons of remote work, this side bar talks about where innovation comes from, since that's one of the alleged reasons they want butts in the office.
Innovation is kind of a loaded term, because if you're being all dictionary-like, it refers to something totally new and game changing. In technology, that makes it a little strange to expect innovation. So much of what comes out of tech, if not most of it, is more iterative and evolutionary in nature. Stuff tends to get better, fast, based on its previous state as a jumping off point. I don't think people really seek true innovation, I think they seek fast iteration.
Good ideas are hard to come by, whether they're truly innovative or derivative. I'm not sure that you can simply create culture that leads to innovation. You can definitely get process around faster iteration, though. Take that process and add the right people, and that's when you can make magic.
I reject the notion that you can force innovation. However, if you get the right personalities together, in person or virtually, and give them the right tools, I do think you can get them iterating to greatness quickly.