Market innovation is the foundation for the survival and development of new ventures. However, under the background of emerging economies, market innovation of new ventures is affected by many specific factors. Based on the institution-based view, this paper empirically examines the impact of competition from the informal sectors and firms’ political rent-seeking on new ventures’ market innovation by using the World Bank’s China-Enterprise Survey data. The results show that both informal sector competition and political rent-seeking have significant positive effects on new ventures’ market innovation, but political rent-seeking doesn’t strengthen the positive impact of competition from informal sectors on firms’ market innovation. The demand for intellectual property protection caused by informal competition is not the main reason for new ventures’ political rent-seeking, while the needs for capital and avoidance of harsh and tedious government regulations are the main reasons why new ventures participate in political rent-seeking. Therefore, policymakers need not worry too much about the negative impact of competition from informal sectors on new ventures, but it is necessary to eliminate the informal economy gradually by promoting the convenience of enterprise registration and strengthening the protection of intellectual property rights. It is also necessary to eliminate firms’ rent-seeking motivation through continuous deepening of market-oriented reform and streamline administration and delegating powers.