This paper explores the idea that well-aligned HR practices may produce varied and even negative effects oninnovation performance. To do so, we examine the interaction effect between rewards for and appraisal ofknowledge behaviours on radical and incremental innovation outcomes. Drawing on the insights from thestrategic HRM literature on the internal fit between HR practices, as well as the developments of the knowledgegovernance approach, we argue that rewards and appraisal applied together produce a setting that is conducivefor deepening existing knowledge bases, but hindering for more distant and diverse knowledge search.Empirical test of these hypotheses using the data from 259 Finnish companies lends partial support for thisargument. Intensive usage of appraisal of knowledge behaviours reduces the positive impact that rewards forsuch behaviours have on radical innovation. At the same time, rewards and appraisal do not intensify eachother’s effect on incremental innovation.