Japanese family firms are distinguished by various interesting yet different characteristics from their counterparts in other countries. Among these characteristics are the governing structure of the ‘ie’ system, the influencing role of ‘codes of merchants’, the adoption of non-blood sons to succeed to the business, and the long-lived phenomenon of century-old family firms. Despite numerous important studies explaining these characteristics, our essential knowledge about the rational logic behind them remains limited. Thus, to further aid our understanding of these characteristics and the logical essence, this article reviews a range of literature on institutional embeddedness, including socio-political history, cultural values, and religious influence on Japanese family firms. The article also proposes a research direction to comprehend better the institutional logics behind Japanese family firms and their behaviour.