Yeah innovation goes both ways, from the perspective of success on the market completely ignoring the road safety of your car in favor of making it cheap to produce could be a very innovative positive thing to do. This is why a measure of government interference in the form of regulation is needed even in the case of private goods in my opinion.
Very few things are purely public or purely private. On the one extreme, you have things like military defense of a country's borders. On the other, you have things like individuals trading services like a local kid mowing a lawn for $20, where it would be extremely inefficient for the government to do much regulation. So yes, there's regulation even in private goods like cars or cell phones, where public things like roads or the airwaves are involved.
One central principle of economic libertarianism is one of informational efficiency, that is, that individuals and entities close to a particular phenomenon in which they have an economic interest are going to be incentivized to know about it in detail and make rational decisions based on a profit motive. Government interference with that inevitably introduces inefficiency, and therefore should be avoided or at least only undertaken when that inefficiency is outweighed by some general good.
This works well even for necessary items, as things like cell phones have become, where there actually is a fairly strong freedom on the part of consumers to get whatever they want and avoid things they don't. It isn't so good in things like cable television, where oligopoly and collusion between market participants basically means consumers get screwed.
Anyway, the libertarian philosophy isn't, at its core, a terrible one. What's terrible is when it's taken to extremes and applied unevenly by people who are only interested in advantage for themselves and disregard coercion (the bugaboo of libertarians) when it's against people they don't like. That's a huge problem with the philosophy at its core and why it's currently basically relegated to a splinter group of Republicans instead of getting the attention the ideas themselves (or at least some of them) actually deserve.
So what often gets called the libertarian wing of the Republican party loves to try to sound like Ron Paul on economic issues and taxes, but then completely ignores it when it comes to things like starting dumb wars like Iraq, even though going to war is basically enacting a huge tax on the country. Even if you don't raise taxes then, the resources to wage war don't just come out of nowhere, and you're eventually going to have to raise taxes or, even worse, devalue the currency by creating more of it.
The problem is the stupid left-right dichotomy keeps libertarians like this from separating out issues where they agree with the majority and then actually pushing those issues. For instance, on the Iraq deal, you'd get a lot of left and far-left agreement with opposing a number of specific policy issues that are shared with libertarians, but political groups are very bad at teasing out individual points of agreement and pushing on them (while continuing to fight about the other issues).
To get back to the point, that's because a lot of these issues are shared by various groups that are effectively extremists, or at least out of the mainstream, and treat each other as the enemy rather than as people who might actually have something in common.
