The impact of dual embeddedness on firm upgrading is affected by contingency factors. Based on the survey of 212 manufacturing enterprises in Guangdong Province, the research results show that:Dual embeddedness has a significant positive impact on functional upgrading. Market network embeddedness has a significant positive impact on process upgrading and product upgrading. The absorptive capacity does not play a moderating role in the impact of market network embeddedness on process upgrading. The absorptive capacity plays a positive moderating role in the impact of market network embeddedness on product upgrading. The absorptive capacity plays a positive moderating role in the influence of market network embeddedness on the functional upgrading. The absorptive capacity plays a negative moderating role in the impact of institutional network embeddedness on process upgrading, product upgrading and functional upgrading. Manufacturing firms need to consider the impact of absorptive capacity when they are embedded in the market network for upgrading, and actively improve the firm's ability to absorb knowledge from suppliers, customers and industry competitors to achieve firm upgrading.