This paper constructs a theoretical model of the integration mechanism between the information technology (IT) industry and traditional manufacturing, and uses input-output data to test the theoretical hypotheses. Different from existing research, this paper, from the perspective of product innovation, and based on the theory of enterprise resource capability, explains why IT companies can enter and dominate the industrial chain of the manufacturing industry in some manufacturing sectors. It also explains how the digital transformation of products is a double-edged sword for traditional manufacturing enterprises: it can improve the attractiveness of products of traditional manufacturing enterprises; however, with the improvement of product digitalization, IT companies occupy a more dominant position in the digital transformation of the manufacturing industry, which makes traditional manufacturing enterprises lose their competitive advantage in the process of industrial upgrading. The theoretical explanation put forward in this paper can help us to deeply understand the economic effects brought about by product digital transformation, enrich the theoretical connotation of the integration of industrialization and informatization, and provide a theoretical basis for the formulation of industrial policies.