| Abstract: | HR systems play a critical role in growing knowledge‐intensive firms (KIFs) by facilitating the conversion of human capital into intellectual capital, which has market value. However, the choice of HR system is constrained by the relatively small number of clients they have in business‐to‐business relationships. This article seeks to understand how and why these client relationships affect the choice of HR practices in these firms. We address this issue by drawing on extensive empirical research currently under way in KIFs. Our research shows that HR practices can be influenced strongly by the client, both directly and indirectly. However, some KIFs will use their HR practices as a means of managing the relationships they have with their clients by shaping their boundaries with their clients and building organisational, professional and client identities. The varying client influence can be understood by examining the nature of the power relationship between the client and supplier, which is influenced by the uniqueness of the services provided. This has implications for our understanding of the factors affecting the exercise of a constrained choice of HR systems. |
