Over the past few years, the digital economy has become the mainstream of the business world, and the digital transformation path in the manufacturing industry has become the prevailing theme. Many results of studies also indicate that manufacturing innovative models and competitive advantages are dimensions that should not be overlooked during the digital era nowadays. Digital transformation fundamentally changes the way companies operate and interact with customers, with digitalization driving product, procedure, and technology innovation across factories. Digital transformation is no more an alternative to traditional manufacturing, but a necessity to remain relevant and competitive within the marketplace. Building on these backgrounds, this study is a qualitative literature review, implying that the data will be analyzed and explained utilizing information and documentation acquired from a variety of existing literature. To recognize the influences of digital transformation on manufacturing business performance, this research will review and summarise the relevant literature on digital transformation, competitive advantage, and innovation performance of firms, describing interactions among the three and exposing shortcomings of past literature. Therefore, this study will provide companies with valuable insights that help them stay relevant and competitive in this digital age of digitalization.