We provide a unified explanation for two important trends during the last few decades: the decline of the value premium and the rise of the markup. We show that the decline of the value premium and the rise of the markup are primarily driven by firms with high markups, whereas the value premium and the markup remain stable in firms with low markups. We develop a dynamic model with stochastic technology frontier and heterogeneity in firms' technology adoption decisions to explain this finding. In the

model, by adopting the latest technology firms on the technology frontier reduce the operating costs in production, which in turn increases the markup and decreases the dispersion in their exposures to the aggregate technology frontier shocks. This leads to the rise of the markup and the decline of the value premium among the high markup firms. For firms that cannot catch up with the technology frontier due to adoption costs, they keep operating the old technology, thus the markup stays low and the value premium remains sizable.