This study aims to investigate the impact of digital economy on fostering entrepreneurship and innovative systems. Through comprehensive analysis, the study identifies potential contributors shaping the digital economy’s involvement to entrepreneurship and innovation systems.The study uses a modified total interpretive structural modeling approach which delves into the complex interrelations between digital economy, entrepreneurial activities, innovation ecosystems and sustainable development objectives. In addition, the authors explain the hierarchical structure and mutual influences among various contributors, highlighting critical pathways and feedback loops.The findings from the study illustrate the contributors of digital economy on entrepreneurship and innovative systems such as “supporting regulatory framework”, “information democratization” and “outreach and awareness” at the bottom level. Furthermore, the study assesses the implications of these findings, including economic growth, job creation, enhanced competitiveness and societal well-being. Moreover, it explores the potential for addressing environmental challenges and fostering inclusive development through digital innovation.By providing a nuanced understanding of the dynamics between digital economy, entrepreneurship, innovation and sustainable development, this study offers actionable insights for policymakers, businesses and stakeholders seeking to leverage digital technologies for long-term socioeconomic progress.