||The purpose of this study is to investigate the innovation process in engineering consulting firms as a knowledge-intensive service sector. The main argument is that at the firm level innovation process involves the effective functioning of the human resource system, which is intimately related to how knowledge is managed. The entire system is the manifestation of the firm’s strategy. A multiple case study approach is used for data collection. Altogether, managers of 11 consulting firms have been interviewed; and the qualitative accounts of the interviewees are the key source of information. Through reviewing systems of different firms, the functions of human resource systems are illustrated. The interactions between different elements of the human resource system and knowledge system can help characterize a firm. Strategic intent, resource levels of the firm and the service and labor market conditions are the main forces that shape each firm’s systems. Furthermore, the cases have established the connections between human resource system and knowledge systems. A series of contextual characteristics that are conducive to effective functioning of the entire system has also been identified. The crux of the issue in this regard is that extensive systems in large firms are relied upon for managing knowledge. Human resource system plays a pivotal role on managing knowledge for the firm. Finally, results have also illustrated how dynamic capabilities affect innovative capabilities of a firm. Precisely, it has been shown how an international firm has built up and more recently been reconfiguring one of the divisions of the firm to capture the emerging and evolving market opportunities. The unique organizational capabilities as well as its available resources including human and knowledge appear to be the key source of agility for the firm.