In a study of two Japanese companies, I found that internationalization often leads to organizational identity conflicts, centered on the company’s historic values, beliefs and practices, and the way they may be changing. One reason for conflict is that while top-level management often espouses global traits (e.g. diversity, use of English, international market focus, etc), these aspects are often miscommunicated to middle management, leading the latter tend to re-emphasize their Japanese identity. Middle management often uses terms introduced by top management, but in practice their Japanese identity is still important. Identity conflict also arises due to geographical distance. When global headquarters are separated from national headquarters, it can lead to a feeling of distrust and disconnect. This is often heightened by companies’ well-meaning efforts to place foreign employees in the same location. Such concentration of foreign staff results in a bifurcation of the organizational identity, such that one part becomes “global” while the other sees itself as Japanese. This negatively affects knowledge-sharing and may eventually lead to organizational divestiture. In order to offset the identity conflicts that arise during internationalization, companies should co-locate global and national staff, and ensure that top management’s strategies are understood by middle management.