First, which version of InstallShield Pro are you using? Versions prior to 7.0 are not supported by this action:
Note: InstallShield Professional versions prior to 7.0 are not supported by this action (InstallShield Pro uses a two-step build process [Compile.exe, then IsBuild.exe] but the executables are stored in different locations in version 6.x). For earlier versions, generate the batch file within InstallShield (from the Build menu) and run it from a Run Program action with a command of %DOSCMD% <path>\Build.bat.
If you're using 7.0+, the action attempts to auto-locate the exeuctable by finding the path of the executable associated with the extension of the filename entered. It appears that this is failing. You might try re-installing InstallShield to ensure that it has the file extension registered properly. Otherwise, you will need to locate IsBuild.exe on your system and provide the full path+filename for it on the Options tab.