We have reached a point in which huge steps in hardware improvements is not a thing, hence my question. Or maybe they can but companies want us to pay money to get the latest OS and new features?
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The android System in general is developed by Google. However to make it run on a specific smartphone, the manufacturers still have to adapt it to the hardware by adding drivers, configuring the system, etc.
And many vendors do some larger changes to the android base system (changing user Interfaces, and so on), which make producing a new Android version for a smartphone even more difficult (meaning expensive).
And a company will not take these costs for developing and testing a new version for an older Smartphone which have no active sells anymore, unless it matches some kind of business plan (e.g. if you advertise yourself as a phone vendor with long support).
For many smartphones there are community driven firmwares, where other people do the work of adapting a new Android version to a specific hardware instead of the manufacturer. However you need to find someone willing to do that (and publish it in the internet), and even then some requirements needs to be fulfilled (you must be able to run a system which is not developed by the phone manufacturer and the manufacturer must have released some certain info about their hard and software).
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