Abstract: Based on the analysis of the institutional basis of management by objectives (M.B.O.) of economic growth in China, this paper discusses the impact of M.B.O. on local economic growth and the consequences of misallocation of resources caused by it from both theoretical and empirical aspects.Theoretical analysis shows that M.B.O is a double-edged sword that can promote local economic growth and lead to local misallocation of resources，while the role of short-term goal is different from that of long-term goal:the main driving force of local economic growth is short-term rather than long-term;the higher the achievement of short-term goals, the more serious the misallocation of local capital is,the achievement of long-term goals will significantly inhibit the misallocation of local capital, while the achievement of long-term and short-term goals has no significant impact on misallocation of local labor. The above conclusion has certain enlightenment significance to the healthy operation of China′s economy.

Key words: economic growth target, local economic growth;management by objectives (M.B.O.);misallocation of resources