It would be more accurate to say that competition breeds automation. A lot of the actual innovation occurs outside the constraints of capitalist profit-seeking & competition, in publicly funded universities, fan/modding communities, non-profit open-source projects, etc. https://twitter.com/brentpatterson/status/1345414432135008256

Collaboration and knowledge-sharing breed innovation, whereas capitalist competition breeds monopoly (the most profitable option), which in turn leads to technological stagnation as budgets/cost-of-entry rise and companies become more risk-adverse.

If you look at the game industry for example, almost all of the recent popular genres and gameplay innovations started with mods, which were made in people's spare time and released for free.

The innovations created in these communities are then enclosed by corporations and private investors, which either transform them into commodities to be sold on the market, or incorporate them into the production process in order to cut down on labour costs.

When new labour-saving technologies are adopted, they tend to make things worse for the workers whose labour is being deskilled/replaced/surveilled, leading to lower wages, longer hours, and more precarious jobs.

While stagnation is obvious with large monopolies like Disney, even in small startups, the need to compete with other products on the market often fetters creativity and discourages the kind of free experimentation and open collaboration that is needed for innovation to happen.

The idea that competition is the source of innovation is used to discourage people from considering alternative economic models that don't rely on market competition or private ownership. It's an integral part of capitalist myth-making and ideology.

Anyway if you want to learn more about this here are some things you can read/watch.

Kirby Ferguson, Everything is a Remix. https://www.everythingisaremix.info/watch-the-series

John Bellamy Foster, "What Is Monopoly Capital?" https://monthlyreview.org/2018/01/01/what-is-monopoly-capital/

And some books.

Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (2013).

John Bellamy Foster and Robert W. McChesney, The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China (2012).