G1 Bionicle and Hero Factory are one and the same universe, just very different time periods and even galaxy Sectors. End of G1 Bionicle was the start of forming a planetary civilisation (from Type 0 to Type 1)...Hero Factory is end of that transition (not quite Type 1 yet due to energy problems, but a start of a space faring species). The events of Toa Nuva being summoned to Okoto Universe happens way before the events of Hero Factory....so much so that there arent many historical information for that initial time period of Planetary unification.
Makuhiro is one of the original descendants of Spherus Magna, making an giant conglomerate empire using refined energized protodermis now known as Quaza. Makuhiro City is the Tokyo of Spherus Magna by that point in time (with all the good technological sides to it, and also the bad social aspects of it). Its the birthplace of Makuhiro and current HQ of his conglomerate empire (being also renamed after its most influential citizen). Hero Factory is created as a special task force of Makuhiro City, and the most military side of the company. The ethical questioning of the existence of such a military force of factory mass produced armies within an already powerful company has lead to many sanctions and juristictions placed by the main government of the planet. The company will be supervised by the government and each decision will be followed by the government. To produce positive PR, the company had taken a more positive media friendly approach in how it presents it self to the wider public.
The creation of Hero Factory Units was seen as an unethical approach to planetary and galactic protection (like Clones in SW). But such army was deemed too important and necessary for the safety of the Capital Planet and numerous fledgling colonies and closely explored worlds.
The full properties of Refined energized protodermis or Quaza have never been tested in depth. Some speculated that during the planets re-reformation by the Great Being has lead to changes within the structures of the planets protodermis reserves. Being modified by the Ignika, some also theorised that the element has life giving properties...which is why its a very effective in making Hero Factory Heroes (and after time making them more sentient) than just typical droids and robots. In its early days after the reformation of Spherus Magna, this new form of energized protordermis has lead to many medical, biological and technological advancements (its use became more important after the gradual loss of Elemental Mask Powers that were tied to the Great Spirit) to the society and the new found mixed Matoran/Agori species (species being able to breed, sleep, drink, eat, and die), which also has cultural significant within the mythos surrounding Mata-Nuis sacrifice in creation of the new Spherus Magna.
(Yes, I tied in all three universes together cause I like Omniverse spanning stories).