This study advances research on strategic human resource management by examining whether better firm performance depends on the alignment between an organization’s human resources (HR) system and its innovation strategy. The authors argue that the unique problems underlying exploration innovation strategies and exploitation innovation strategies require core workers to engage in different types of knowledge-search and -combination behaviors. Alternative HR systems theoretically produce different knowledge-search and -combination behaviors by way of their effect on employees’ ability, motivation, and opportunity structures at work. Drawing on a field study of 230 software firms, the authors demonstrate that alternative HR systems support either an exploration or exploitation strategy and that alignment between a firm’s HR system and innovation strategy results in firm performance gains and misalignment results in performance penalties.