If you consider Warhammer: Total War to be canon,
*Hippogryph Knights enter the fray* 
.
I don't.
A video game is totally different. When I played Space Marine on Xbox 360 way back in the day, I single handedly killed thousands of Orcs and CSMs. That doesn't mean that a Space Marine is canonically that powerful. Plus, the power levels in a game like Total War are constantly in flux with updates and patches.
Not while the Dawi still have engineering geniuses like Burlok Damminson, his son Grimm Burloksson and Malakai Makaisson, and more pragmatic, less dogmatic leaders like Thorgrim (who is still alive, none of that End Times bull). Thorgrim understood the balance between preserving tradition enough to not be seen as mad or controversial, but also being more open-minded and open to adaptation than the standard Dwarf.
A few exceptions to the rule. On a whole, the humans (especially the Empire) are far more willing to adapt, innovate and evolve.
I'm sure in the past you yourself have claimed the Dwarfs are upper-mid tier due to their dominance in the Shooting Phase, supreme anti-magic and better melee ability, while Empire are steadfast mid-tier due to their jack-of-all-trades nature.
Yes, they are both mid-tier. Personally, I'd be more weary of facing the Dwarfs, but that is subjective. Others I've spoken to have felt differently. I'm not sure if one has a significantly better winning percentage than the other. An army like the Dark Elves are definitively better, while an army like the Beastmen are definitively worse. The Dwarfs and the Empire are in the same ballpark.
But on the other hand amidst that 'growth' the Imperial City States are still trying to stab each other in the back and hamper each other's development to make themselves look like the top dog, while the Dwarfs have been unified pretty much since their race was first created, and would never engage in the dishonour of sabotage. Not to mention the incompetence of many Imperial leaders over the years has set their nation back a lot. Who's to say that Karl Franz's successor won't be an inbred maniac or a ruthless tyrant?
I don't doubt for a second that the Dwarfs are significantly more unified (assuming that we are excluding the Chaos Dwarfs versus Dwarfs relationship). That said, competition and warfare can be significant instigators of technological innovation. Our own real life history is proof of that.
You could argue that the Skaven rival the Empire for second place - true their war machines are perhaps more ramshackle, but their inventiveness is easily superior to the Empire, and perhaps the Dwarfs as well.
Alongside of the Chaos Dwarfs, the Skaven are easily the most inventive.
Considering that by the time of 8th Edition the Dwarfs had developed one-man flamethrowers (Drakeguns), ironclad ships that are not dependent on wind power and have the monopoly on flying machines both large and small, I wouldn't dismiss them so easily. Not to mention that while being traditionalistic, they are not stupid. If they saw the manlings develop something new, I don't see why some Dwarf Engineers wouldn't try to develop something as effective but more reliable (as all Dwarf stuff is), if not better, to avoid their race being shown up by the upstarts. That sort of humiliation would be worthy of the Slayer Oath.
The Empire does have the Mechanical Steed. Despite having its share of problems, such a technology is more advanced than Flamethrowers or airships (as evidenced by the fact that we have helicopters, blimps and flamethrowers, but not a mechanical steed that can
fully replicate the movements of a war horse).
On the whole, the Dwarfs produce better quality equipment, but the Empire is more adaptive and more willing to evolve. It kind of mirrors them as races, where the Dwarfs stagnate (or are in decline), while the Empire, despite short term setbacks, are on the rise.
The humans of the Empire are simply more willing to "think outside the box". They have a different mentality as compared to the vanilla Dwarfs.
they saw the manlings develop something new, I don't see why some Dwarf Engineers wouldn't try to develop something as effective but more reliable
I think Dwarf pride would get in the way of that. I don't see them trying to copy (even with the addition of improvements) human engineering.
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