Technology has gaining importance as vital factor for competitiveness in the world economy.rnTechnology transfer through Foreign Direct Investment (FDI) has become the predominantrnchannel of technology transfer. FDI can have important technological spillovers in hostrneconomies, especially if it takes a joint-venture form subject to local control. Technologyrntransfer has been a subject of considerable interest to many groups, such as policymakers,rninternational funding agencies, and business executives, due to close relationship betweenrntechnology transfer and economic growth. It has aroused the interest of academic researchers.rnDespite all this attention, however, the concept and mechanism of technology transfer remainsrnvague, controversial, and inadequately operationalised. rnUnfortunately, due to the need for capital and/or absence of appropriate national technologyrnpolicies, most host developing countries focus on maximizing the quantity of their FDI inflow,rnwhile underestimating the importance of appropriateness of technologies transferred throughrnFDI. However, competitive technology has become a basic prerequisite for economicrndevelopment and growth, and developing countries like Ethiopia should try to achieve bestrnpossible technological gains from FDI. rnUsing a firm-level survey, this study examines effects of FDI on local metal and engineeringrnfirms. The survey indicates that technological inflow through FDI is an important conduit inrnpromoting local firms to upgrade and to be competitive in national as well as internationalrnmarket. However, the local technological capability to adopt the technology, the collaborationrnbetween foreign based companies and local firms, and the national technology policy are veryrnweak to benefit from FDI. The study also explores the possible contributing factors related tornforeign technology transfer, such as domestic competition and linkages (training andrnconsultancy, employee movement, etc). The experience of newly developing countries isrnreviewed with regard to FDI and technology transfer and the gaps are identified and analyzed. rnTo address the problem the researcher proposes policy implications and framework by putting rnthe contributors to effectively transfer technologies from FDI.