Pervasive computing environments enable the composition of applications from components allocated across different devices. The applications have to be composed at run-time, to cope with changes in context and resource availability in the environment. In addition, this functionality has to be automated in order to minimize user involvement in application management. We propose two new algorithms which are capable of dynamic allocation of application components to multiple networking devices. These algorithms optimize the selection of the networking devices and the structure of composite applications according to a given criteria, such as minimizing hardware requirements, maximizing the application QoS or other criteria specified by the user. The algorithms are based on generic models. This allows the approach to be used in multiple application domains. We analyze the performance of these algorithms in a simulated environment and suggest a system that utilizes our algorithms for pervasive application composition.