The Valar could endue things with life, but not independent minds. They could also shape new things out of erma (prime matter) that Eru had created.
The Valar had power to endue things that they designed with corporeal life; but they could not make things with independent minds or spirits: sc. they could not make things of equal order, but only ones of lower order. In ultimate truth they did not in fact “make” even corporeal life, which proceeded from Eru. But they had assisted in the general design of Eä, and severally, in different degrees and modes, in the production from the erma (or prime substance) of things of many kinds. The idea of life and growth came from Eru, but the Valar, under Him, devised the shapes and forms of living things. When Eru gave being to this design, in general and particular, and it became Eä, unfolding in Time, He set in motion life and growth, or those processes which would in time lead to this. But when he permitted the Valar to descend into Time, to carry out in Eä (or reality) the things that they had designed in thought, then viewed in Time they appeared to make things which were alive. Indeed it is held that being themselves in Time they experienced the making as a new thing, differing in this experience little, save in degree of power
and art, from the makers or artists among the Incarnate. Neither they nor the Incarnate could make things utterly new; they could not “create” after the manner of Eru, but could only make things out of what already existed, the erma, or its later variations and combinations.
The Nature of Middle-earth - "The Powers of the Valar"
As far as the difference between Morgoth and the the other Valar, it seems that due to Morgoth's various flaws, everything he made would feel like an imperfect imitation of other things, and would be completely tied to his will.
It is said that of the Valar Manwë had the greatest knowledge, so that no lore or arts of any of the others were to him a mystery; but that he had less desire to make things of his own, great or small; and under the cares of the Kingship of Arda the desire ceased, for his mind and heart were given rather to healing and restoration. The harms and evils of Melcor were to him the greatest grief, and he ever sought to redress them or turn them to good.
Melcor on the other hand desired even with passion to make things of his own, being restless and unsatisfied with all that he did, were it lawful or unlawful. Within Eä he had small love for anything that had been, desiring always new things and strange. He would ever be altering what he had made, and would meddle with the works of the other Valar, changing them, if he could, or destroying them in wrath if he could not. Though his mind was swift and piercing, so that, if he would, he might have surpassed all his brethren in knowledge and understanding of Eä and all that is therein, he was impatient and overweening (believing his powers of mind greater than they were). Too quickly he assumed that he had grasped all the nature of a thing, or all the causes of an event; and his plans and works often went amiss for that reason. But he learned no wisdom from this, and charged his failures ever upon the malice of the Valar, or the jealousy of Eru.
Since he had no love even for the things that he had himself made, he came at length to reck not at all how things had come into being, considering neither their natures nor their purposes. Thus he desired only to possess things, to dominate them, denying to all minds any freedom outside his own will, and to other creatures any value save as they served his own plans. Thus it was seen in Arda that the things made or designed by Melcor were never “new” (though at first he strove to make them so) but were imitations or mockeries of works of others.
The Nature of Middle-earth - "The Powers of the Valar"
