Digitalisation can be described as a sequence of technology and supply shocks which affect the economy through employment and labour markets, productivity and output, and competition and market structure. This paper focuses on how digitalisation-the process of diffusion of digital technologies-is affected by institutions and governance. It discusses a number of theoretical mechanisms and empirical evidence for different sets of European and other countries. The results indicate that a higher quality of institutions is usually associated with both a greater speed of diffusion and a greater spread of digital technologies. The results also suggest that there are large, policy-relevant differences in the diffusion process depending on the level of development as well as the state of technological change of a country.