European Scientific Journal May 2016 edition vol.12, No.13 ISSN: 1857 – 7881 (Print) e - ISSN 1857- 7431 134 FDI Effects To Host Country’s Technological Progress: Evidence From Albanian Manufactoring Industry Aurel Koroci, Dr Albanian University/ Head of Department of Economic Sciences, Albania Erjona Deshati, Msc Albanian University/ Department of Economic Sciences Assistant, Albania Remzi Sulo, Asoc.Prof Albanian University/ Dean of the Faculty of Applied and Economic Sciences, Albania doi: 10.19044/esj.2016.v12n13p134 URL:http://dx.doi.org/10.19044/esj.2016.v12n13p134 Abstract Foreign direct investment (FDI) is perhaps one of the most ambiguous and the least understood concepts in international economics. Common debate on FDI is confounded by several myths regarding its nature and impact on capital accumulation, technological progress, industrialization and growth in emerging and developing economies (Akyüz, 2015). In this circumstance, the purpose of this paper is to explore empirically the impact of Foreign Direct Investment (FDI) on technological progress of Albanian manufacturing industry sectors. We also investigate the effect of FDI on domestic output, namely, whether there is evidence that the inflow of foreign capital crowds out domestic output. Using panel data analysis the empirical part of the paper finds indications that the introduction of FDI has a positive effect on the output of domestic enterprises, that is, FDI has improved the productivity and the technology upgrading of local enterprises. Keywords: FDI, host country, technological progress, panel data Introduction The crucial role played by the technological progress in the economic growth is now widely accepted (Romer, 1994). With the rapid expansion of international trade and international capital flows in the global economy, the effect of FDI on the host economy, particularly on technological progress, has been of great interest to both academics and governments, and remains a contentious issue. Many scholars have studied about FDI effect to host country’s technological progress and they have generated mixed results.