I believe innovation is being harmed by programs like PRISM and TEMPORA. Countries backed off of US technology firms after these programs were leaked to the public. Countries and foreign businesses lost trust with American businesses. These programs directly affect our economy and our jobs. They harm our society and future innovations.
PRISM (and TEMPORA) will have a chilling effect on speech and publication. This, has a inhibiting effect on basic and applied research -- and ultimately technological progress itself. Innovation cannot survive without free and open debate -- and scientists and engineers will be less free if they have to produce data for the government mine by "speaking into the flowerpot."
Yes, innovation is harmed by programs like PRISM, because you cannot speak your mind when the government is watching. People are afraid that they will say something that the government will not like, and after that they will be retaliated against or even killed. It is hard to act freely knowing you are being watched.
I do not think that innovation is hindered by such programs as PRISM and TEMPORA. I think that innovation is something that will continue despite such programs that are a little intrusive in the privacy and rights of the people. I also think that innovation that isn't illegal has nothing to worry about.