In the entrepreneurship literature, digitalization has often been measured as a uniform construct, and previous research has largely neglected how its distinct dimensions interact with the institutional context. Adopting a disaggregated approach, this study breaks digitalization down into three core components: connectivity, internet use, and digital technology integration. It empirically investigates whether these components have heterogeneous effects on entrepreneurial activity (TEA) and whether institutional quality asymmetrically moderates each of them. To this end, panel data from 41 countries (both developed and developing) over the period 2007–2023 are used, along with the System GMM estimator to discourse endogeneity and represent entrepreneurial dynamics. The results reveal that: first, all three digital components have a positive and significant impact on entrepreneurship, but the magnitudes differ, with connectivity being the strongest direct driver. Second, institutional quality asymmetrically moderates the effect of each component; notably, the moderating effect of institutions on digital technology integration (the most advanced layer of digitalization) is very large and significant, while this effect is much weaker for connectivity (the infrastructural layer). Third, a final-effect analysis shows that in weak institutional environments, connectivity yields the dominant return, but as institutions improve, digital technology integration achieves the highest payoff. These findings carry important policy implications: in countries with weak institutions, priority should be given to investing in communication infrastructure, whereas in economies with strong institutions,