The importance of intellectual capital (IC) has been emphasized during recent year. Such a trend puts higher education systems under great pressure for two main reasons: first, IC has been shown to be a key driver of innovation; second, the higher education system assumes the unique function of fostering innovation. Knowing how best to improve IC is considered the most significant factor of success in enhancing innovation. However, the higher education system of today has difficulty in measuring IC precisely to improve its innovation performance. This study is to conquer such a problem by establishing critical criteria for IC assessment. Based on the findings, the higher education system is encouraged to successfully evaluate its IC performance and then find ways to improve this performance to achieve better innovation.