install setup file in client system

If your setup file is correct, then it should install all the files your application needs, except external applications. The latter includes SQL Server itself, for a number of reasons:

0) You can only distribute SQL Server Express for copyright reasons - not SQL Server full version.
1) They may already have SQL Server installed on the network. If so, then they will presumably want to use that version.
2) If they do have SQL server installed and you start proliferating SQL server Express instances, you are going to annoy the heck out of the database administrator...
3) A single site installation of SQl Server is a lot more likely to be backed up than a number of scattered version under user control.
4) Sql server is quite complex for a "normal" user to install and administer - it is not a good idea!
5) It will destroy the primary advantage of using Sql Server over SqlCE or SQLite - multiuser access. If everyone installs their own copy of SQL server, then you will have multiple copies of your database, each used by a single person. This will cause some confusion, and (depending on how you wrote the original database) may take some considerable effort to combine into a single instance when the problem is realized.

So there are three major possibilities for why your app doesn't work:
1) There is no SQL server instance installed on the local network that the user can access
2) You have not provided a correct connection string for the local user SQL server instance
3) You haven't created the database in the local SQL server instance.

Which of these it is, we cannot tell from the little you have told us!