Capitalism does encourage reward for innovation, which is why it works better... up to a point. Innovative people exist everywhere - it's part of who they are - but when no rewarded, they won't work. What we have in the US is that crafty, selfish businessmen manipulate the system and "invent" all kinds of walls that steal the rewards of innovation for themselves. Now we have tech "giants" and massive corporations that pay peanuts (in comparison with their actual profits off innovation), run the government, and want oppressive laws and treaties like the TPP.

As I'm fond of saying: In a capitalistic system, a few people end up with all the money and power. In a communistic system, a few people end up with all the money and power. The means are different, but the result is the same.