By comparing Lucent Technologies and Cisco Systems over twenty years, one illustrates that a firm that outsources exploration through an Acquisition and Development (A&D) strategy of start-ups and exploitation specialization can be more innovative and competitive than an ambidextrous organization. The success of an A&D strategy depends on the embeddedness of the firm in the network of organizations comprised of an open innovation system and supported by an inter-organizational process of innovation. The embeddedness of Cisco Systems in the ambidextrous high-tech cluster of the Silicon Val- ley, especially its ties to venture capital firms and start-ups, explains the success of its A&D strategy. The spreading of A&D strategy among large firms reinforces the dynamics of the open innovation system and nurtures the clusterÕs ambidexterity by increasing incentives for other organizations and individuals of the network to explore new knowl- edge and create fresh start-ups.