Absolutely correct, Capitalism will incentivize innovation only as long as it's profitable to do so. Once a company becomes a dominant player in their industry, innovation actually becomes largely unprofitable.

We can see this play out all the time, this is why industry giants almost never try to outcompete smaller start ups by innovating their products and services, instead, they either crush them out of the market via a bunch of different methods. Or they just buy them out, kill off their IP, or if it's way better, they just brand it as their own, and usually fire most of the old staff.

In a Capitalist system, this actually creates a whole new incentive structure where start ups will try to grow as fast as possible with the sole intention of getting bought out by an industry titan, making the founders of the start up filthy rich.