Relative path in InstallShield is not so easy to use. Try to use such hack in Install Shield configuration file (*.isl). Find section <table name=”File”> where located links to all files which are included in installation package. Then use prefix “<ISProjectFolder>\..\” when you want to use relative path. E.g.
<row><td>installutil.exe</td><td>InstallUtil.exe</td><td>INSTAL~1.EXE|InstallUtil.exe</td><td>0</td><td/><td/><td/><td>1</td><td><ISProjectFolder>\..\Service\bin\Debug\InstallUtil.exe</td><td>1</td><td/></row>