What factors led to the formation of the canon i.e. a specific version of literature as the correct one?
The question is a good one, I won't answer the question fully for you (in the assigned 500 words!), but I will be happy to point you in a useful direction or two.
"Canon" is a term from the Christian church and has meant the equivalent of "church law" (or "the official version") for multiple centuries. The application of the term to non-religious texts is much more recent. This more recent "canon" of what is and what is not "good English-language literature" is nowhere near as precisely formulated as the religious "canon." The Chriistian Bible has a very clear canon; some ancient texts are included in the Bible and others are not. The list of famous works of English-language literature, by contrast, with vary at least a little from person to person.
A second item worth exploring is the contribution of specific critics, such as Matthew Arnold's "touchstone method" or F.O. Matthiessen's "American Renaissance."
A third item worth exploring is the power of publishers (or, more specifically, the publishers of anthologies, such as Norton) to reshape the canon simply by including or excluding specific authors and works in their anthologies.
Canon formation is a very interesting subject! You may find it useful to revisit some of the major debates of the so-called "canon wars." See some or all fo the links below.
Part of what has established the canon has to do with power and definition. Individuals in the position of power constructed the canon to reflect their own views and appreciations. The canon in a Western Studies course thirty years ago is much different than the one featured now. The canon has become fluid and dynamic, in part because more voices have been integrated into the dialogue. The discourse is not as narrow as it used to be. Part of the reason for this is the idea of globalization and the new pluralist ideas which have become spread with the increase of information technology. At the same time, individuals have become more aware of the differing cultural valences inside and outside of the academic setting. As power and voice have become more spread out, the canon has been defined to include more voices, and there is little to indicate that the idea of multivocality won't cease in the future.