Organizational ambidexterity (i.e., the ability to pursue exploratory and exploitative innovation simultaneously) is crucial to firm survival. In this study we explore how multiunit firms might develop ambidextrous organizational units in response to environmental demands. We examine how environmental and organizational antecedents affect a unit’s level of organizational ambidexterity. Our study reveals that multiunit firms develop ambidextrous organizational units to compete in dynamically competitive environments. Moreover, we show that organizational units with decentralized and densely connected social relations are able to act ambidextrously and pursue exploratory and exploitative innovations simultaneously. Our study provides new insights how multiunit firms can cope with contradictorily pressures for exploratory and exploitative innovations. JEL-Classifications: