Abstract: Base on the newest research of firm heterogeneity, this paper better the estimation methods of factor price distortion, markup and update of technology, then analysis the effects of factor price distortion and markup to the update of technology with the statistic and empirical estimation ways. The results show:(1)Factors price distortion become the strategic resource, which push forward the update of technology, profit transformation distortion, efficiency transformation distortion and experience transformation distortion exist in the update of technology of native manufacturing firms;(2) Human resource and material capital is the core force which promote the technology of Chinese manufacturing industries, material capital play a more important role than human resource;(3) Native manufacturing firms have new products paradox, export have positive effects to technology update, non-factor cost increase have stronger negative effects to technology update than factor cost increase, the subsidy’s effects to technology update are ambiguous.