The paper deals with the question which determinants can explain regional differences in the number of start-ups in Austrian and Western German districts when observing the business related service sector. We separate our sample in firms operating in knowledge intensive sectors and start ups belonging to the remaining ones. This separation is done in order to interpret the estimation results for start-ups in knowledge intensive sectors in a reliable way. The remaining firms serve as a control group. Moreover, we observe different influences of some exogenous variables in Austrian and West German districts. That's why these variables are included separately for Austrian and West German districts in the estimates. The main result of this study is that regional supply and demand conditions have a crucial impact on the regional distribution of start-ups.