Many firms closed down during the transformation process in East Germany. The firms surviving from the former GDR have not reached the required level of economic Performance. Therefore, particularly new innovative firms are expected to create a competitive industry sector and to give important impulses to the technological development. The present paper deals with firm formation in high-technology sectors of East-Germany between 1991 and 1994. An over-view is given of the legal changes happening in companies of the former GDR and of comparative advantages of various foundation forms. In addition to firm formation dynamics, the regional clustering of new firms and the relevant location conditions are empirically analyzed. It becomes obvious that the regional R&D endowment with universities, technical colleges and other R&D-labs has a great influence on the regional accumulation of new firms in high-technology industries. In contrast, the hypothesis that unemployment favourably affects the foundation of firms must be rejected.