This study explores how technologically sophisticated firms respond to different types of standard setting in an emerging economy. Considering the heterogeneous institutional logics that are embedded in a hybrid-mode standard-setting system, we distinguish between market- and government-led standard setting. Using data of 8,519 artificial intelligence–active firms engaging in Chinese artificial intelligence standard setting from 2010 to 2020, we demonstrate that firms with superior technological capability are more likely to engage in market-led versus government-led standard setting. This is due to divergent goals and norms in different types of standard setting. We also find that subfield technological diversity intensifies market competition, thereby improving the incentive of firms with superior technological capability to engage in market-led standard setting with the aim of shaping future technological trajectories. Additionally, government ownership relieves goal misalignment and mitigates firms’ concerns about technology expropriation, thus promoting firms’ engagement in government-led standard setting.