No.
It certainly can, and it certainly does at times. But a limitation by all accounts stimulates innovation as much as it decreases it, as regulation requires industry to invent new and efficient ways to do business and meet required standards.
Further, government intervention in business can be for the express purpose of making certain that innovation continues. The initial TARP bailouts were meant, in a great part, to melt the credit freeze brought about because of the insolvency in the financial sector caused during the current crisis. I won’t argue the success of it, but the clear purpose of balancing the asset/liability sheets of lenders to return them to solvency allows them to start lending again, especially in areas that might be considered risky – which includes innovative ventures by large and small businesses. Without credit, most businesses aren’t going to get off the ground. And when there’s no credit available, you essentially guarantee that most industries are going to go into damage control mode, protecting rather than risking and innovating.
Finally, government intervention in monopoly situations can (read can, not will) ensure that business itself remains competitive and therefore efficient. When one company gains control of a particular area, it can horizontally and vertically expand that control so that the market no longer influences supply and demand, but the industry itself sets both the supply and demand itself. Therefore, you get both an inefficient pricing structure (as there is no force acting upon pricing, and therefore prices are set at a point that guarantees maximum profit to the company) and potentially insurmountable barriers to entry for new competition.
In the end, government intervention is about the balance of public interest and business growth and innovation. It often fails to properly balance those two competing factors, but the current crisis, as well as the crash in 1929, were the result of too little intervention allowing the market to irrationally inflate value based on beliefs not based in reality, the creation of a bubble market, and the bursting of that bubble rippling through all sectors of the economy, was a market-based lockdown. Neither business nor government is infallible…the trick is to find the right balance.