Profit key to innovation.

For one, using law or regulation to create distance between companies and profit-seeking is likely to stymie welfare-enhancing innovations. A central theme throughout Edmans’s book is that profit is not profligate; rather, it is the engine oil for the human wheel of progress. Edmans refers to the social benefits of corporate innovation no less than eighty-four times throughout the book, with numerous examples illustrating a virtuous chain: profit incentivizes experimentation, which leads to break-through technologies, medicines, or consumer services, ultimately enhancing human welfare.48 Indeed, that capitalism and the corporation are at the heart of human progress seems difficult to deny—simply ask yourself to name a great civilization that was created by a stakeholder-oriented society (or, put differently, that did not look favorably on free markets, industry, and trade). In some ways, I would go further than Edmans here. At times, he may be overly sanguine in presuming that companies are inspired to innovate for innovation’s sake irrespective of profit potential.49 It seems more like the exception than the rule: companies might be willing to subsidize research in the hopes of the rare breakthrough— but profit is always part of the equation. So, Edmans is correct that corporate innovation is socially beneficial, but may well underestimate (at least in certain parts) the extent to which profit is the motivational spark, in one way or another. But overall, Edmans’s general point is quite well taken: the realization that we need successful companies that are focused on innovation should put the brakes on stakeholder capitalists’ moves to hamstring corporate profit. After all, forcing companies to forgo profits is likely to translate directly and in the first instance to the R&D line item in the corporate budget.