This study explores the innovation and entrepreneurship capabilities of college students who return to their hometowns, particularly within China’s rural revitalization strategy. By constructing a comprehensive framework, this paper examines four key dimensions that influence these abilities, employing logistic regression analysis to assess the impact of various factors. Notably, including policy support as a variable in Model 2 significantly enhances the Model’s explanatory power by 22.4%, a statistically significant finding (p < 0.001). This underscores the critical role of policy support in bolstering students’ innovation and entrepreneurial skills. Further, through applying structural equation modeling, this research delves deeper into the nexus between policy, institutional environments, and the cultivation of core entrepreneurial competencies, offering insights into the external factors that facilitate competence development. The Model’s hypotheses are rigorously tested for fit, confirming the effectiveness of the proposed framework in understanding and supporting the entrepreneurial endeavors of returning college students.