This study describes the process of developing and validating an instrument that measures students' innovation capacities as a higher education outcome. We introduce an interdisciplinary theoretical framework used to generate items and cover extant literature drawn primarily from the fields of higher education and entrepreneurship studies. We further discuss our use of latent trait theory and item response models to guide instrument development and measure scoring. We then provide the results of a second-order confirmatory factor modeling procedure, which indicated robust model fit. We close by discussing findings and offering implications for both higher education scholars and institutional researchers.