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M&A and Corporate
Consolidation
A Study of the Role
of Competitive
Government Behavior

Fengrong Wang
M&A and Corporate Consolidation
 Fengrong Wang

M&A and Corporate

Consolidation
A Study of the Role of Competitive Government
Behavior
Fengrong Wang
Shandong University
Jinan, Shandong, China

This book is the result of a co-publication agreement between Social Sciences

Academic Press and Palgrave Macmillan based on a translation from the Chinese
language edition: 政府竞争视角下的企业并购与产业整合研究 © Social Sciences
Academic Press, 2016 All Rights Reserved

ISBN 978-981-15-6674-5    ISBN 978-981-15-6675-2 (eBook)

https://doi.org/10.1007/978-981-15-6675-2

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer
Nature Singapore Pte Ltd. 2021
Jointly published with Social Sciences Academic Press.
This work is subject to copyright. All rights are solely and exclusively licensed by the
Publisher, whether the whole or part of the material is concerned, specifically the rights of
translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on
microfilms or in any other physical way, and transmission or information storage and retrieval,
electronic adaptation, computer software, or by similar or dissimilar methodology now
known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
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exempt from the relevant protective laws and regulations and therefore free for general use.
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This Palgrave Macmillan imprint is published by the registered company Springer Nature
Singapore Pte Ltd.
The registered company address is: 152 Beach Road, #21-­01/04 Gateway East, Singapore
189721, Singapore
 Contents

1 Introduction  1

2 Government Competition, M&A, and Corporate

Consolidation: A General Analysis 17

3 M&A Waves in China: A Survey from the Government

Behavior Perspective 73

4 The Mechanism of M&A Under the Impact of Local

Government Competition: Models and Empirical Studies175

5 Corporate M&A and Corporate Consolidation Under

Government Competition: Regional Specialization and
Industrial Agglomeration255

6 Government Competition and Intra-industry M&A:

Studies on Micro and Macro Performances345

7 Government Competition and Conglomerate Merger:

Performance Extension Studies from the Perspective of
Life Cycle Theory405

v
vi Contents

8 Conclusions, Suggestions and Prospects459

Bibliography489
 List of Figures

Fig. 2.1 M&A and corporate consolidation from the perspective of

government competition: a new analysis framework 64
Fig. 3.1 Number of corporate M&A in the US in the third to fifth
M&A waves 75
Fig. 3.2 Total amount of US corporate M&A in the third to fifth M&A
waves76
Fig. 3.3 Number of corporate M&A in China 78
Fig. 3.4 Total amount of corporate M&A in China 79
Fig. 3.5 Average transaction amount of corporate M&A in China 80
Fig. 3.6 Number of corporate M&A in China (after smoothing) 83
Fig. 3.7 Total amount of corporate M&A in China (after smoothing) 83
Fig. 3.8 Filtered movement of the number of China’s overall M&A
events84
Fig. 3.9 Filtered movement of total transaction volume of China’s
overall M&A events 84
Fig. 3.10 China’s GDP growth rate from 1994 to 2012 87
Fig. 3.11 Analysis framework for the local SOE control rights transfer
under regional public governance 99
Fig. 3.12 Number of enterprises in various industries listed in the
A-share market from 2003 to 2012. (Data source: Collated
from the relevant data of CSMAR database) 113
Fig. 3.13 Sum of total assets of the enterprises in various industries listed
in the A-share market from 2003 to 2012. (Data source:
Collated from the relevant data of CSMAR database) 113
Fig. 3.14 Regional distribution of local state-owned listed companies
control rights transfer from 2004 to 2012 133

vii
viii List of Figures

Fig. 3.15 Quantity trend of RTO transactions in China’s Shanghai and

Shenzhen A-share markets. (Data source: Collated from the
relevant data of CSMAR database and RESSET database) 149
Fig. 4.1 Distribution of the combination of tax burden and the
regional environment score of each province 223
Fig. 4.2 The number of different kinds of M&A from 2002 to 2005
and from 2006 to 2009 246
Fig. 4.3 The amount of M&A in each year before and after the
environmental regulations 246
Fig. 5.1 Movement of industrial structure similarity coefficient in the
three major economic zones 271
Fig. 5.2 Provincial mean of Krugman specialization index in China in
1999–2010285
Fig. 5.3 Krugman specialization index by region 296
Fig. 5.4 Relative effective tax rate of foreign-funded enterprises by
region298
Fig. 5.5 Relative stock of national development zones by region 298
Fig. 5.6 Number of M&A of listed state-owned enterprises in
manufacturing industry. (Data source: CSMAR database) 327
Fig. 5.7 Amount of listed SOE M&A in manufacturing industry (Unit:
100 mln yuan). (Data source: CSMAR database) 329
Fig. 5.8 Industrial concentration ratio (ACR4). (Source: RESSET
database)330
Fig. 5.9 Industrial concentration ratio (ACR8). (Source: RESSET
Database)331
Fig. 5.10 Industrial concentration ratio (HHI). (Source: RESSET
Database)332
Fig. 5.11 Manufacturing industry profit variation (Unit: 100 mln yuan).
(Source: RESSET Database) 333
Fig. 5.12 ROE of the manufacturing industry (Unit: %) 334
Fig. 6.1 2000–2009 marketization index of China’s provinces,
municipalities, and autonomous regions. (Source: China’s
Marketization Index: Report on the Development of
Marketization in Various Regions NERI Index of
Marketization of Chin’s Provinces 2011 Report)363
Fig. 6.2 Trend for regional concentration of high-tech industry 396
Fig. 7.1 Trend of conglomerate merger in the representative industries 449
 List of Tables

Table 2.1 Evaluation index system of local government competitiveness

in China 53
Table 3.1 DF test results of three variables 80
Table 3.2 AR (2) results of the three variables 80
Table 3.3 Three-variable AR (1) residual term autocorrelation test 81
Table 3.4 Smoothed data descriptive statistics 82
Table 3.5 Test of China’s overall M&A transaction volume trend 86
Table 3.6 Test of China’s overall M&A transaction trend 86
Table 3.7 China’s two waves of M&A 86
Table 3.8 Correlation analysis of China’s overall M&A and GDP
growth rate 88
Table 3.9 Correlation analysis of China’s overall M&A amounts and
GDP growth rate 88
Table 3.10 Stationarity test of time series data 92
Table 3.11 Transaction time and industries of samples 105
Table 3.12 Definition and values of dependent variables 107
Table 3.13 Descriptive analysis of data 107
Table 3.14 Empirical results of motivations for control rights transfer 109
Table 3.15 Industries of control rights transferred local state-owned
listed companies in 2004–2012 132
Table 3.16 Comparison of descriptive statistics and the mean values 139
Table 3.17 Regression results of the models 141
Table 3.18 Distribution of corporate ownership of sample “shell
corporations”150
Table 3.19 Sample “shell corporations” by region 151
Table 3.20 Changes of regions in RTOs 152

ix
x List of Tables

Table 3.21 Distribution of local and non-local RTOs of shell resources

of different ownership 162
Table 3.22 Definition of variables 163
Table 3.23 Descriptive statistics of major variables 165
Table 3.24 Analysis of correlations between variables 166
Table 3.25 Binary Logistic regression results 168
Table 4.1 Return matrix of the acquirer and the target enterprise 178
Table 4.2 Inter-regional M&A by year 220
Table 4.3 Evaluation index system for regional investment environment 222
Table 4.4 Meaning of analysis variables and data source 224
Table 4.5 Descriptive statistical analysis of major regression variables 225
Table 4.6 Tax competition, regional environment and inter-regional
M&A—analysis of total samples 226
Table 4.7 Tax competition, regional environment and cross-regional
capital flow 228
Table 4.8 Investment attraction effects of tax competition and regional
environment: analysis of the relative scale of inter-
regional M&A 232
Table 4.9 Robustness test of the impacts of different tax burdens on
cross-regional M&A 234
Table 4.10 Tax competition and inter-regional M&A under the
influence of headquarters economy 235
Table 4.11 Statistical analysis of major variables 239
Table 4.12 Financial expenditure competition among local governments
and inter-regional M&A 240
Table 4.13 Number of M&A of different types in 2002–2005 and
2006–2009245
Table 4.14 Explanation of empirical variables 248
Table 4.15 Regression results of M&A trend ①249
Table 4.16 Regression results of M&A trend ➁249
Table 5.1 Definition of major variables and their symbol expectation 268
Table 5.2 Industrial structure similarity coefficients of each economic
zone by year 270
Table 5.3 Descriptive statistics of government competition variables in
the economic zones 272
Table 5.4 Unit root test of each variable 273
Table 5.5 Model 1 and Model 2 multiple regression results 275
Table 5.6 Descriptive statistics of government competition variables 277
Table 5.7 Estimation results of the impact of government competition
on regional specialization 293
Table 5.8 Model estimation results by region 297
Table 5.9 Estimation results by period 300
 List of Tables  xi

Table 5.10 Modes and years of M&A deals 311

Table 5.11 Multiple regression analysis of the performances of M&A 313
Table 5.12 Statistics on distribution of intra-industry M&A in the three
categories and M&A by year 314
Table 5.13 Multiple regression analysis of performance comparison of
Intra-industry M&A in the three categories of industries 316
Table 5.14 Empirical results of industrial concentration of capital-
intensive industries 317
Table 5.15 Type and year of inter-industry M&A 318
Table 5.16 Comparison of Tobin’s Q of industrial innovation and
non-industry innovation M&A 319
Table 5.17 Comparison of M&A performance of industrial innovation
M&A and non-industrial innovation M&A 321
Table 5.18 Correlation analysis 336
Table 5.19 Industrial concentration ratio (acr4) regression analysis 337
Table 5.20 Industrial concentration ratio (ACR8) regression analysis 337
Table 5.21 Industrial concentration ratio (HHI) regression analysis 338
Table 5.22 Manufacturing industry ROE regression analysis 339
Table 6.1 2009 marketization index by province 371
Table 6.2 Enterprise performance evaluation index system 374
Table 6.3 Financial index descriptive statistics 374
Table 6.4 KMO and Bartlett Tests 375
Table 6.5 Extracted Sum of common factors one year before M&A 376
Table 6.6 RTOating principal component matrix for one year
before M&A 377
Table 6.7 Factor score coefficient matrix for one year before M&A 377
Table 6.8 Principal component score covariance matrix for one year
before M&A 377
Table 6.9 Regression analysis results 379
Table 6.10 Indicator system of marketization index 382
Table 6.11 Sample companies by industry 384
Table 6.12 Micro performance evaluation indicators for M&A 385
Table 6.13 Average tax burden of enterprises by industry 387
Table 6.14 Industrial policy scores by industry 388
Table 6.15 M&A performance test results under different intensity of
tax competition 389
Table 6.16 M&A performance test results under different industrial
policies391
Table 6.17 Multiple regression results of the impact of government
competition on intra-industry M&A performance 393
Table 6.18 Main regions of China’s high-tech industry concentration
from 1999 to 2009 397
xii List of Tables

Table 6.19 Unit-root test results 398

Table 6.20 Model regression results 399
Table 7.1 M&A samples by year 407
Table 7.2 Distribution of life stages of sample enterprises 408
Table 7.3 Definition and calculation of variables 410
Table 7.4 Comparison of enterprise characteristics indicators at
different stages of life cycle 411
Table 7.5 Independent samples t-test for the stages of the enterprise
life cycles 411
Table 7.6 Mean test and positive value ratio of sample enterprises
at the growth stage under different government
intervention415
Table 7.7 Mean test and positive value ratio of sample enterprises at
their maturity stage under different government
interventions416
Table 7.8 Mean test and positive value ratio of sample enterprises at the
decline stage under different government interventions 418
Table 7.9 Multiple regression empirical results for M&A performance 420
Table 7.10 Robustness test results 422
Table 7.11 Division standard of industry life cycle 433
Table 7.12 Results of life cycle division of China’s industries 433
Table 7.13 Sample M&A by year 438
Table 7.14 M&A score factors 440
Table 7.15 Definition of variables and expected symbols of main
variables441
Table 7.16 Test results of government intervention on M&A
performance in the year of the merger 442
Table 7.17 Number of conglomerate merger in the representative
industries449
Table 7.18 Variance contribution rate 452
Table 7.19 Statistics of score difference 453
 CHAPTER 1

Introduction

1.1   The Questions

Corporate mergers and acquisitions, or M&A, and corporate consolida-
tion have, for nearly half a century, been one of the areas of greatest con-
cern to economists and policy-makers. At the beginning, scholars of
industrial economics made their fundamental explorations on the issues.
George Joseph Stigler and Oliver Williamson have been leading scholars
exploring the effects of M&A from the aspects of corporate consolidation
performance and public welfares. But as the welfare effects of M&A are
complicated in theory and non-convergent in conclusion, many empirical
studies have been conducted on the effects of M&A performances. And
these explorations mostly resort to event studies and accounting informa-
tion. As for the social effects of M&A, discussions are mostly carried out
following diverse M&A models (Barros 1998; Yoshio Kamijo and Yasuhiko
Nakamura 2009), M&A types (Julia et al. 1996), and the impacts of M&A
policies (Khemani and Shapiro 1993, with remarkable research results
achieved. In response to the waves of M&A in China, studies on M&A
theory and empirical studies on M&A have flourished, making the field a
thriving branch of research. Many scholars, focusing on the aspect of
enterprises, study the mechanism and micro effects of corporate consoli-
dation using event studies and accounting information. And from the
aspects of M&A and industrial market structure, helpful explorations have
been made by Gao Feng et al. (2001), Fan Conglai and Yuan Jing (2002),
Liu Yu (2008), and Wen Haitao (2010).

© The Author(s) 2021 1

F. Wang, M&A and Corporate Consolidation,
https://doi.org/10.1007/978-981-15-6675-2_1
2 F. WANG

As a mode of stock resources allocation, corporate M&A is internally

driven by an institutional environment. In economic transitions, the con-
ducts of governments, particularly government competitions, are key fac-
tors affecting M&A and corporate consolidation. Li Shanmin (2006), in
the light of local government intervention, has carried out studies on value
issues like restructuring through M&A and diversified M&A. Pan Hongbo
(2008) has made empirical and normative studies on the “tunneling” and
supporting effects of restructuring through M&A. Feng Xingyuan (2001)
and Zhou Ye’an and Zhao Xiaonan (2002), with the paradigm of govern-
ment competition, have explored the rise and progress of local govern-
ment competitions in China and their positive and negative effects upon
economic growth and regional economic development.
On the whole, previous studies on M&A and corporate consolidation
are mostly based on a mainstream economic theoretical framework, fol-
lowing the perfect market hypothesis. In empirical studies, the explora-
tions on the effects of M&A are in many cases limited to the micro level.
Discussions on the basis of industrial market structures mostly take indus-
tries and market structures as exogenous variables and conduct analyses of
their impacts upon the conduct and timing of M&A. This book will reex-
amine the industrial nature of M&A from the perspective of intra-­
governmental competition and endeavor to build a corporate consolidation
model and framework for analysis of the issue. It will further explore the
issues concerning M&A in the process of economic transition. The results
are expected to enrich and improve the relevant literature on M&A and
will be of great significance to more empirical studies on intra-governmen-
tal competition and the effects of industrial economy and the perfor-
mances of regional economy.
Since the 1990s, corporate M&A has been an issue of great academic
interest in China, socially and economically, with the country’s economy
transforming from “the incremental reform” to “the stock reform.” Since
2009, ten programs for industrial revitalization and adjustments of key
industries have been intensively introduced by China’s State Council and
the regional governments of China, exposing the significant role M&A
can play as a means for corporate consolidation and the market structure
optimization in the aspects of policy-making and economic performance.
“Industrial concentration” driven by governments has become a striking
feature of a new round of corporate M&A in China. But a definite fact
concerning the issue is the rise of local protectionism, market segmenta-
tion (Zhou Ye’an 2003; Bai Chong’en et al. 2004a, b) brought by
 1 INTRODUCTION 3

intra-­governmental competition in the period of economic transition, and

the regional industrial “homogenization” and industrial “decentraliza-
tion” in corporate M&A (Jiao Guohua 2009; Wang Fengrong, Ren Meng,
Zhang Fusen 2011). Then, against the backdrop of economic transition,
what has been the motivation and mechanism of government actions,
especially government competition, involved in M&A? and what has been
the working mechanism and effects of government competition in seeking
ways for corporate consolidation and in reshaping market structure and
industrial structure? How can the allocation of resources be rationalized
and optimized? Empirical studies on these issues will be of practical signifi-
cance for a better understanding of the mechanism and effects of the inter-
action between government and market in resource allocation and the
rectification of local government competitions. They can clarify the direc-
tion for industrial growth under the existing systems and provide empirical
references for the transformation of economic growth pattern.

1.2   Definitions of Key Concepts

1. Government and Local Governments

In economics, the term “government” derives from homo economicus.

Scholars, with Adam Smith at the head, have interpreted man as homo
economicus pursuing the maximization of their self-interests. Though the
hypothesis basically manifests the principles of human activities, it has its
own grave defects. On this basis, new institutionalism has revised the
assumption about economic agents and changed the hypothesis of the
agents’ complete rational behaviors into bounded rational behaviors, mak-
ing the premise of behaviors for economic agents more reasonable. Later
on, scholars of public choice theory use the revised reasonable person
hypothesis to explain government conducts and believe that the govern-
ment, as the agent of public interests, also meets the behavior hypothesis
of maximizing the self-interests in itself and the individual officials. Among
them, Niskanen (1971), through its probes into the behavior motives and
the external environment of government officials, has established a theory
of monopoly and bureaucracy economy, concluding with the proposition
that the government will pursue budget maximization. It believes that the
government, in its social process, also plays the role of homo economicus,
although the government is not representing a single person, but a
4 F. WANG

behavioral agent embodying various interest subjects. From this, the

results of government’s “public choices,” like those choices of enterprises,
are the results of gaming among all interest subjects. Unlike the public
choice theory, the classical economics likens the government to a “black
box,” holding that the government is the “night watchman” of the market
economy, “the almighty charity organization” addressing market failure at
zero cost, the general representative of all people and social interests with-
out its own independent benefit target, and a kind of “paradise model.”
The institutional economists, employing the theory of public choice, take
the government as a reasonable person seeking the maximization of its
own interests, and, by bringing the government down to earth from para-
dise, stress that the goal of government actions is to maximize its own
benefits.
In this book, the concept of government is defined in the light of insti-
tutional economics. The government, as an economic organization, has as
its own goal to maximize its own interests. But unlike economic organiza-
tions in the common sense, its objective function is multifaceted. The local
governments, as essential components in government systems, have their
own interests as well, which involve the public interests in the jurisdiction,
the interests of the local government departments, and the individual
interests of the local government officials. In short, the government rep-
resents not only public interests, but public interests at various levels and
of diversified value orientations. Meanwhile, with the changing restraint
conditions and incentives for government conducts, the objective func-
tions of local government conducts will have to make corresponding
adjustments.

2. Government Competition

Government competition can be traced to the assumption of “foot vot-

ing” in Tiebout (1956). Albert Breton (1998) has put forth the concept
of competitive government, and Wallace E. Oates (1999) has gone further
and presented the Leviathan model of government. He Mengbi (2001),
establishing “an analysis model for competitive government,” has general-
ized three conditional frameworks for making analysis of government
competition, that is, the initial structure condition, political mechanism
and culture, and foreign trade relations, pointing out that government
competition may be divided into horizontal competition and vertical com-
petition, or in other words, there exist competitions between local
 1 INTRODUCTION 5

governments and governments at a higher level in respect to resources and

control power, and also competitions between government organizations
on the same level.
Following the analysis model of competitive government by He, Feng
Xingyuan (2001) has stated that government competitions are to a large
extent institutional competitions, there being a contention for tangible
and intangible resources among different government organizations.
Wolfgang Kasper and Manfred E. Streit have carried out studies on trans-
national government competitions from the perspective of institution,
believing that the concept of institutional competition highlights the
internal rules system and the external rules system of a nation and has a
significant impact upon the cost level and international competitiveness of
a nation. Thomas Apolte (1999) has also raised the point of government
competition being a competition of institutions. It holds that there are
many problems existing in political vote competition. Supplementary
mechanisms are expected to be added to the vote competition through
institutional competition so that the citizens in a certain jurisdiction can
effectively exercise supervision over the administrators. So the drive for
institutional competition derives on the one hand from the supervisory
pressure of citizens in the jurisdiction and on the other from the competi-
tion with other jurisdictions.
Yang Hutao (2006) explores the influence of institutional changes on
government competition and puts government competition into three
kinds. One, government competition is for grabbing scarce productive
resources. Two, government competitions are the local governments’ atti-
tudes toward capitals and services beyond their own jurisdictions and their
regulatory measures for strengthening their own advantages under “the
federal system.” As it is hard to measure the market admittance policy and
the effective tax burden, this kind of government competition is also
referred to as “covert government competition.” Three, government
competition is the general appraisal on the performance of local govern-
ments based on the policy information of other administrative regions by
citizens of a certain administrative division. The process has impacts on the
migration of citizens and can drive the politicians for better work.
Government competition of this kind is the government competition
brought up by Albert Breton.
The above discussion sums up the intension of government competi-
tion from various viewpoints. The concept of government competition we
are adopting in this book refers to the transnational or transregional
6 F. WANG

competitions staged among governments in different countries or among

the regional governments in a country for attracting productive factors
like capital, technology, talents, and for providing public goods or public
services in the fields of investment environment, government perfor-
mance, and institutional innovation. Under China’s framework for transi-
tional economy, the competitions between local governments have been
interregional competition driven by incentives, fiscal and political, brought
by the central government with the institutional supply mode, generally
unfolding around the resources. And their specific performances are of
two kinds: one is to attract the inflow of essential factors of production,
and the other is to prevent the outflow of local productive factors.
As government competition is an interactive concept, we will use in
some chapters of the book concepts with a broader sense like “govern-
ment intervention” or “government conducts” on the ground of chang-
ing views and the limitation of empirical data. For the definition of
“government intervention,” the interpretation in the past studies is diver-
sified. The Chinese version of The New Palgrave Dictionary of Economics (
新帕尔格雷夫经济学大辞典) has interpreted the English term “regula-
tion” as “管制” (meaning “management and control”), and its antonym
“deregulation” as “放松规章限制或放松管制” (meaning “loosen regula-
tory restrictions or loosen control”). In some classic dictionaries of eco-
nomics, government regulations refer to all acts of government policy
decisions for exercising restraints over the pricing, marketing, and produc-
tion of enterprises, including, for example, the control over the pricing
level and the setting of standards for products and service quality. This
book, based on the current situation in China, holds that government
intervention can be regarded as a collective term for all government activi-
ties where governments, under the market economy condition on the
ground of market mechanism, regulate the conducts of economic agents
to redress, improve, and remedy market defects through macro indirect
control and micro direct control under the laws and policies. Theoretically,
all government conducts that may influence the acts of economic agents
fall into the category of government intervention.

3. Corporate M&A

Corporate M&A is an economic phenomenon in the modern market

economy. It first emerges in the operation of a capitalist market economy
and has been the most important mode of economic activities for the
 1 INTRODUCTION 7

centralization of capital. Karl Marx was the first to foresee the trend for
capital centralization and the irresistible mergers and acquisitions in capi-
talist enterprises when he observed that the splitting up of the total social
capital into many individual capitals or the repulsion of its fractions one
from another is counteracted by their attraction. This is centralization
proper, as distinct from accumulation and concentration.
From a micro (the enterprise) point of view, mergers and acquisitions is
a mode for the external development of an enterprise (Wang Fengrong
2002). Specifically, there are two types of corporate mergers and acquisi-
tions: merger and acquisition. Acquisition refers to the legal act where a
company exercises the control of a target company by acquiring all or part
of the shares of the target (the acquired company). Based on what is
acquired, acquisition can be classified into stock acquisition and asset
acquisition. Merger refers to any transaction through which two or more
than two entities merge to form an economic unit. The common ground
of merger and acquisitions is to from an economic unit in the end. The
difference between them lies in that merger means the formation of a new
entity by the merging of two or more units, while, through acquisition,
the acquired party is incorporated into the company system of the acquir-
ing party and rarely is the case that the acquiring company has no struc-
tural changes after the merger of the acquired company; therefore,
acquisition is often seen as a kind of merger. As the motivation and prin-
ciples are similar in merger and acquisition, and acquisition is an important
mode and means of merger, so they are often pooled together and referred
to as mergers and acquisitions, or M&A for short.
From a macro point of view, M&A is the reallocation of stock capital
and is also a micro process of capital flow in regions and industries; thus,
M&A has effects on both the regional economy and the industrial
economy.
This book, merging the macro and micro perspectives of M&A,
explores on the one hand the occurring mechanism and the influence fac-
tors of M&A from the industrial point of view, and on the other hand
studies the corporate consolidation and regional economic effects of
M&A, with the latter being the emphasis and our original idea.

4. Corporate Consolidation

In contrast to the many in-depth discussions on corporate M&A,

studies on corporate consolidation are fewer. As of today, there has been
no consensus on the definition of corporate consolidation. Lyu Lachang
8 F. WANG

(2004) observes that corporate consolidation refers to the process

where advantageous and leading enterprises and corresponding indus-
trial structures, with big corporations and enterprise groups as their
core, are formed through the reallocations of the transregional and
cross-ownership productive factors in industries to achieve a long-term
competitive edge on the ground of the laws for industrial development.
Yang Jianwen holds that corporate consolidation is a process featuring
the division of production and specialization, aiming at the realization
of effective coordination among big and medium and small businesses
in an industry to improve its core competitiveness and international
competitiveness through cooperative competition. The definitions
above specify the goal of corporate consolidation as to gain a kind of
competitive edge, though in different approaches, one through the
reallocation of productive factors, and the other through the coopera-
tive interaction between enterprises.
Corporate consolidation in the general sense means a process from
decentralization to centralization at two levels. At the meso level, corpo-
rate consolidation is a process to realize the optimizing, upgrading, and
reallocating of resources in an industry. It embodies two dimensions:
regions and industries. At the macro level, corporate consolidation is a
process for the effective disposition of the internal factors of an industry.
The two levels are complementary and unite to give corporate consolida-
tion a relatively comprehensive definition.
This book, taking the logic and empirical studies into account, will
place particular emphasis of corporate consolidation on the meso level and
regard corporate consolidation as a phenomenon when at a certain period
large scales of M&A occur and bring about the optimization and upgrad-
ing of industrial structure, leading the industry from decentralization to
centralization. In empirical analysis, the book, out of the necessity for
comparative analysis, will survey the corporate consolidation (M&A)
effects at the industrial level.

1.3   Research Framework and Contents

Based on the paradigm of government competition, this book, starting
from the inherent issues of M&A in the economic transition period in
China, explores the working mechanism and performance of M&A on the
development of industrial economy and regional economy, taking as the
logic thread “the existence of M&A wave—the occurring mechanism of
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 PLATE XLV
FIG. 1

Lacrymal Fistula on the Right Side; Ectasia of the

Lacrymal Sac on the Left; Bilateral Epicanthus.
(Haab.)
FIG. 2
 Dacrocystitis. (Haab.)

THE CONJUNCTIVAL SAC.

The mucous membrane lining the conjunctival sac is perhaps the
most exposed to irritation and even infection of all mucous surfaces. It
is not strange then that conjunctivitis is the most common of all eye
affections. Whether irritated by constant exposure to dust and dirt, or
raw and cold winds, or by the heat of a blast furnace, by the dazzling
brilliancy of electric lights, or contact with bacteria, it displays a
surprising degree of accommodation and resistance. It has peculiar
susceptibilities, particularly to the germs of gonorrhea and diphtheria.
To these it is peculiarly sensitive, and under their influence it may
quickly succumb. The harm done in either of these conditions is by no
means limited to the conjunctiva, but may extend in such a way as to
eventually cause loss of vision.
Nowhere else may the phenomenon of hyperemia be so easily
studied as by watching the ocular conjunctiva for a few moments after
the occurrence of irritation. The rapidity with which the vessels dilate
and become visible, the occurrence of the consequent redness and
swelling, and the reflex phenomena attending it become appreciable
within a short time. In the chronic conditions the tissues become
thickened and less mobile. A chronic conjunctivitis is the constant
condition in certain laborers whose eyes are exposed in their
occupation.
A peculiar granulomatous condition of the conjunctiva, especially
the palpebral, is that known as trachoma, which appears to be due to
a specific form of infection that leads to exudation, organization and
thickening, intensified in punctate areas, and giving the surface the
appearance of an ordinary granulation. This condition has assumed
such importance as to be sufficient for the exclusion of aliens and
immigrants.
The milder conditions of acute or subacute conjunctivitis subside
under cold applications and mild antiseptic and astringent eye-washes
or collyria. These should be frequently instilled, beneath the lid
whenever this area is involved as a complication of injuries to the
head or face. In acute cases of the infectious type, such as the
gonorrheal or diphtheritic, atropine should be used locally, so that the
iris may be drawn out of harm’s way and the pupil left free should
resolution and recovery ensue. Individuals suffering from either
gonorrhea or diphtheria should be cautioned and protected from
possibility of conjunctival infection. The eyes of the newborn are not
infrequently infected during the process of parturition. The parturient
canal of women suspected of having an infectious lesion of this kind
should be cleansed before the passage of the fetal head, and in all
suspicious cases instant and constant attention should be given to the
eyes of the newborn infant.

THE LACRYMAL TRACT.

The lacrymal gland, though situated in the anterior and upper part of
the orbit, and beneath the upper lid, where it is ordinarily well
protected, is nevertheless liable to both acute infections and chronic
irritations. When acutely inflamed it usually goes on to abscess
formation. We have then acute dacryo-adenitis, which will produce the
ordinary symptoms of phlegmon, with the added ocular features of
vascularity and chemosis of the conjunctiva and more or less edema
and immobility of the upper lid. Displacement of the eyeball may be
produced by great inflammatory swelling. These abscesses tend to
discharge either through the skin near the external angle or
sometimes through the conjunctiva. While in the former case a scar
results, it nevertheless is a preferable point either for spontaneous
opening or for incision. If the case be seen in time it will be advisable
to make this incision early and so limit destruction. (See Plate XLV,
Fig. 1.)
The lacrymal gland suffers occasionally in instances of
constitutional syphilis, undergoing chronic and obstinate enlargement.
It may also be the site of tumors either non-malignant, usually
adenoma, or cancerous, most instances of the latter being
expressions of extension.
The tear passages proper are composed of the canaliculi, the
lacrymal sac, and the duct. These are altered, occasionally, in their
relations, or absent, as the result of congenital defects. The passages
proper frequently become obstructed, as the result of any chronic
irritation which produces thickening of the conjunctiva, and in many
laborers and others who are exposed to dust, dirt, or cold winds there
will be a more or less constant stillicidium or overflow of tears. In some
of these cases it is sufficient to slit up one or both canaliculi with a fine
probe-pointed bistoury.

DACRYOCYSTITIS.
The lacrymal sac proper is frequently the site of both acute and
chronic disease, known as dacryocystitis, which is the result of
infection spreading from the conjunctival sac, rarely from the nose, or
the exaggeration of conjunctival thickenings, like those mentioned
above. The first symptoms are overflow of tears, accompanied by
swelling or enlargement in the region of the sac. By pressure upon this
a mixture of water, mucus, and sometimes pus may be expressed. As
the disease goes on the fluid becomes purulent. If the sac, by
pressure, can be emptied into the nose the nasal duct may be
regarded as patulous and the treatment is simplified. If not there is
stricture, usually at the upper end of the duct, which requires division
and dilatation. The more chronic forms of trouble in this region are
frequently intensified into acute phlegmonous lesions which, if
neglected, will lead to spontaneous perforation and the formation of a
lacrymal fistula at a point below the inner angle of the eye. (See Plate
XLV, Fig. 2.)
Treatment.—The treatment should consist of exposure of the sac
by incision of the canaliculi and its irrigation by means of
a syringe and antiseptic fluid. Unless this fluid passes easily into the
nose the stricture should be divided and Bowman’s probes passed,
the principle of treatment being the same as that in treating urethral
stricture. This part of the treatment should be referred to an oculist.
In acute dacryocystitis with suppuration the sac along the natural
passages should be opened. When a diagnosis of an acute lesion of
this kind is made nothing but the most radical treatment is advisable.

THE LIDS.
 Congenital deformities of mild degree are not infrequent about the
eyelids.

EPICANTHIS.
Epicanthis is a term implying folds of redundant skin extending from
the internal end of each eyebrow to the inner canthus and over the
lacrymal sac. It varies much in degree, is a more or less hereditary
feature in certain families, and is not infrequently associated with other
defects. The palpebral fissure varies in length in different individuals,
giving a longer or shorter window through which the eye proper shall
appear. Sometimes the fissure is much too short and requires division
or extension, which is easily made by incision at the outer angle.

COLOBOMA.
Coloboma is a term applied to various lesions of the eyelid, the iris,
and the choroid, implying a defect in structure, which, in the eyelid,
leaves a V-shaped deficiency, corresponding to harelip, whose edges
may be brought together by a simple operation.

STYE; HORDEOLUM.
The eyelids are subject to certain painful or disfiguring lesions,
which frequently come under the notice of the general surgeon. Of
these the most common is stye, or hordeolum. This is a phlegmon of
one of the minute glands along the margin of the lid, which has
become infected and violently reacted. It forms a miniature furuncle,
often associated with conjunctivitis, and giving a disproportionate
reaction. So soon as the presence of pus can be detected a puncture
should be made and the contained drop of pus exvacuated.
Threatening suppuration may sometimes be aborted by local use of 1
or 2 per cent. mercurial (yellow) oxide ointment.

CHALAZION.
A somewhat similar but non-inflammatory cystic distention of one of
the Meibomian glands, which pursues a slow and painless course, is
called chalazion. It presents rather beneath the mucous surface, but is
often visible through the skin. Its contents are mucoid or dermoid.
When it attains troublesome dimensions it should be exposed through
a small incision, usually external, and thoroughly extirpated.

XANTHELASMA.
Small, elevated areas of dirty-yellow color are met with in the skin
about the eyelids, more often near the inner angle. Such a lesion is
called xanthelasma, the lesion being a fatty metamorphosis of a
portion of the skin structure. While harmless, it is amenable to excision
for cosmetic effect.
Any of the ordinary tumors which affect similar tissues elsewhere
may be seen about the eyelids. The more common are the vascular
tumors, especially small nevi. Epithelioma occasionally commences
along the palpebral margin, but is more often an extension from
neighboring tissues.

BLEPHARITIS.
The margins of the lids are frequently involved in a mildly infectious
inflammatory condition called blepharitis, in which nearly all the
structures participate; when the borders alone are involved it is
referred to as blepharitis marginalis. The condition is largely due to
dirt, and to irritation in which the Meibomian ducts seem to share. It is
accompanied by chronic conjunctivitis. The condition is seen more
often in the ill-nourished, the rickety, and the tuberculous. The best
local treatment consists in the use of an ointment of yellow oxide or
yellow sulphate of mercury. The former may be used in 2 per cent.
strength, and the latter not stronger than 1 per cent. This should be
applied along the lid margins at night, and thoroughly rubbed in. A
commencing phlegmon and stye may be aborted by one of these
preparations.

TRICHIASIS.
Another very annoying complication, and usually the sequel of the
condition already mentioned, is trichiasis, or turning inward of the
eyelashes. Chronic irritation and cicatricial contraction on the inner
aspect of the eyelids, or a chronic blepharospasm, which may be the
result of corneal infections, serve to draw the lids inward, especially
with the margins of the hair follicles, so that the eye-winkers grow
toward the ocular surfaces, which they constantly irritate. The result is
a vicious circle, each morbid condition intensifying the other. In time
there is produced a condition of entropion, which is to be remedied
only by operation. It is not sufficient to treat trichiasis by epilation, as
the hairs will grow again and continuously cause trouble. The cause
should be removed and the effect treated.

ENTROPION.
By this term is meant a condition of inversion of the margin of one or
both lids, by which the external surface is brought into actual contact
with the surface of the eyeball. It is a chronic condition brought about
through the action of several contributing causes. Any condition of the
cornea or deeper portion of the eye which leads to photophobia and
spasmodic closure of the eyelids will produce in time hypertrophy of
the orbicularis, with corresponding strengthening of the muscle and
exaggeration of its activity. Chronic blepharospasm will thus in time
lead to a mild degree of entropion, while any affection of the inner
palpebral surfaces which leads to cicatricial contraction will still more
intensify it. So soon as trichiasis or irritation by the eyelashes is added
to what has gone before, every feature is exaggerated and the cornea
is made to lie practically in contact with the skin surface of the eyelid.
A further consequence is corneal disease, often with ulceration and
opacity, with even worse structural changes.
The condition is really a serious one and is to be treated not alone
by operation upon the lid, but care should be given to all the
contributing features. So far as the lid condition alone is concerned, I
have found the operation suggested by Hotz the most satisfactory of
any, at least in average cases. An incision is made from one end of
the lid to the other, along the distal border of the tarsal cartilage, and
down to it. Through this a bundle of those orbicularis fibers which run
parallel with the incision is dissected away. In extreme cases the tarsal
cartilage, which is incurved as the result of the old condition, may be
either incised or a strip excised from its structure. Sutures are then
inserted which include not only the borders of the skin incision, but the
exposed border of the tarsus and the tarsoörbital fascia. By applying
the central suture first, and then one on either side, it will usually be
found that as the sutures are tightened the edge of the lid is drawn
outward and the desired effect obtained.
The large number of operative methods which have been suggested
for the cure of entropion bespeak the variety of causes which may
produce it and the many devices to which different ingenious
ophthalmic surgeons have resorted.
Fig. 390
ECTROPION.
This condition is the
reverse of entropion,
and implies eversion of
the margin, or of a
considerable portion of
a lid, with consequent
exposure of its
conjunctival surface,
which undergoes
changes in
consequence of which
it becomes thickened,
contracted, and
irritated. Ectropion may
possibly be produced
by violent orbicular
Arlt’s operation for ectropion. (Arlt.)
spasm, especially in
children, the lids being
so tightly shut as to be everted. Ordinarily it is the result of external
lesions which produce cicatricial contraction, like burns, or of chronic
ulcerative lesions along the palpebral border, such as are met with in
tuberculous and syphilitic disease. The lower lid is much more
frequently involved than the upper.
For the relief of ectropion plastic operations are practised, usually
on the lower lid. The milder cases require a V-shaped incision, its
apex downward, with free dissection of the integument up or near to
the margin of the lid, by which it is released from the scar tissue which
has bound it down. Fig. 390 illustrates the general principle of such an
operation. The lower portion of the V-shaped defect is then brought
together with sutures, the triangular flap being fastened in a position
much higher than that in which it originally rested.
All of these operations upon the eyelids are included under the term
blepharoplasty, of which the above is the most simple. When
necessary new flaps may be raised from the temporal region, from the
forehead or from the cheek, as may be required, and turned into
place, their pedicles being so planned as to carry a sufficient blood
supply for nourishment of the same. If this supply be properly provided
these operations are practically always successful. It is necessary only
to make the transplanted flap at least one-third larger than appears to
be necessary, judging from mere size of the defect, for experience
shows the necessity of allowing at least one-third for primary and
cicatricial shrinkage. A heteroplastic operation is occasionally
performed for this purpose, by which the flap of skin is detached from
an entirely different part of the body, or from the body of another
individual. Skin thus transplanted should be prepared by removal of all
of the fat upon its raw surfaces, skin alone being desired and not other
tissue. Figs. 391, 392, 393 and 394 illustrate blepharoplastic
operations of various types, which may be modified or made more
extensive. These are but a few of the various plastic devices, and are
intended to serve merely as suggestions or examples rather than
methods to which one is limited.
 Fig. 391

Richet’s operation for ectropion. (Arlt.)

Fig. 392

Fricke’s method of blepharoplasty. (Arlt.)

 Fig. 393 Fig. 394

Dieffenbach’s method of blepharoplasty. Arlt’s method when a portion of the eyelid

(Arlt.) is to be sacrificed. (Arlt.)

INJURIES OF THE EYEBALL AND ADNEXA IN GENERAL.

This topic has already been considered. It seems advisable,
however, to summarize some of the results of such injuries in order to
call attention to their dangers and methods of treatment. Burns of the
orbital regions, for instance, are liable to cause not only opacity of the
cornea following ulceration, but adhesions between the conjunctival
surfaces and the palpebral margins. The term symblepharon is
applied to those lesions where the lids are more or less fixed upon the
globe and their motility partly or completely impaired. When the edges
alone of the lids have grown together the condition is known as
ankyloblepharon. Both of these conditions are the result of adhesion
of granulating surfaces and of cicatricial contraction, and should be
avoided.
By a concussion of the orbital region, and especially of the eyeball,
all sorts of injuries may be inflicted, from those involving the cornea to
deep lesions which leave little or no superficial evidences, but cause
partial or complete blindness. Detachment of the retina, for instance,
is one of the possibilities of such conditions. Intra-ocular hemorrhages
or dislocation of the lens, with traumatic cataract, may also occur.
The sclerotic may be ruptured with or without the presence of a
foreign body, in which case the contents of the eye may have partially
or completely escaped. An eye which has collapsed from these
causes offers an almost hopeless field for the general or special
surgeon, and little can be done, save possibly for cosmetic purposes.
There is danger of sympathetic ophthalmia, and it may be a question
whether evisceration, i. e., completion of the evacuation, may not be
the wiser course.
Perforating wounds, even when inflicted by minute bodies, have
dangers of their own, including the possibilities of infection. The
interior mechanism of the eye is so easily disturbed, and its
transparent media so easily clouded, by the results of accident or
hemorrhage, that even apparently trivial injuries may be followed by
disturbances of vision.
Treatment.—The general principles of treatment of all such injuries
should include, first, the removal of every detectable
foreign body, followed by the application of cold, and the use of
antiseptic eye-washes, which, however, must not be used too strong
lest they irritate. Saturated boric-acid solution is perhaps as strong as
anything which is permitted, while even this may occasionally require
dilution. In addition to this the use of atropine solution is always
indicated. It has the double effect of soothing and allaying pain and of
dilating the iris into a narrow ring. With such measures as these it may
be possible to save vision; at all events it will limit reaction and prevent
harm.

DISTURBANCES OF INNERVATION.
The nerves which supply the eye and its adnexa may undergo
injury, either within the orbit or within the cranium, or in their course
from one to the other. The paralyses may be caused by syphilis, by
intracranial tumors, or by injury. A careful study of the areas and
nerves involved will sometimes lend considerable help in diagnosis,
both in traumatic and pathological cases. Thus diplopia, or double
vision, may be caused by paralysis of the external rectus on one side,
by which its antagonistic internal rectus is permitted to swerve the eye
too much to the inner side and away from the normal axis of vision
required for single sight. When there is complete paralysis of the third
nerve there may be drooping of the eyelid, called ptosis, with impaired
motion of the eye, upward, inward, or downward. The eye will roll
outward because the external rectus is supplied by the sixth nerve.
There will also be dilatation of the pupil, with loss of accommodation.
When the upper lid is raised there is also double vision. This third-
nerve paralysis, however, is not always complete, and diplopia may
result only when the eye is directed in a certain way. When the sixth
nerve is paralyzed the eye is rolled inward, and again there is diplopia.
When the fourth nerve is paralyzed the eye is but slightly displaced
upward and inward. When the sympathetic nerve is involved there will
be protrusion of the globe with dilatation of the pupil. This will be
accompanied by flushing of the face.

MUSCULAR AND ACCOMMODATIVE DEFECTS.

Detection of errors of accommodation is practically a specialty
within a specialty, while the various forms of strabismus, or deviation
of the eyes from their normal axes, depend largely upon regulation of
accommodative errors.

REGION OF THE EXTERNAL AND MIDDLE EAR.

The region of the ear is subject to congenital malformations,
deviations, and defects, which include anomalous shapes of the
auricle, malpositions of the organ, defects in the cartilaginous
structure with resulting deformity, and congenital excesses or
redundancies by which there are made to appear supernumerary
auricles or portions thereof. These latter have been described by
Sutton and treated in his work on Comparative Pathology. They bear
relation as well to the branchial clefts, and are of great interest from a
phylogenetic point of view. Some of these defects result from absolute
arrest or excess of development, others from injury during intra-uterine
life; some are accentuated by lack of care during the early months of
infancy. The most common deformity of the ear is that by which it is
made unduly prominent and deflected outward or forward, the
cartilage being thick and abnormally curved. Such overlapping or
overprominent ears can be made to assume their proper position on
the side of the head by the excision of an elliptical piece, either of skin
or of skin and cartilage, at the point of junction of the ear and the
scalp. The amount to be removed should be proportionate to the
desired effect. The parts may be brought together by sutures, and the
auricle should then be bound upon the head.
Fig. 395 illustrates a common form of defect, inherently of the
cartilage and of the overlying skin. This is but one illustration of many,
two cases being rarely found exactly alike. Not infrequently these
arrests of development include the structures of the middle ear as
well. The auditory meatus may be entirely covered and concealed, or
may be absent, having failed to develop.
 Fig. 395

Developmental defect of external ear. (Broome.)

Supernumerary auricles are usually found as small tags of skin and

cartilage in front of or below the ear. They are easily removed and
leave no disfiguring scar.
The external ear is also exposed to injury, which it frequently
receives in the way of contusions and lacerations. It is occasionally
detached. The ordinary wounds of these parts require only the
conventional treatment, while it may be possible, by replacement and
approximation of a completely detached portion, to see it re-adhere.
This happened to the writer after his horse had completely bitten a
piece out of the ear of his groom. Here, as with detached finger-tips,
cleanliness is necessary, and the parts must be kept warm and
protected after dressing. The cartilage of the ear is covered by a
perichondrium which corresponds to the periosteum. Beneath it, or
beneath the skin alone, blood may be extravasated as the result of
contusions. When such collections fail to promptly resorb they should
be incised and the contained blood released. Such lesions are
referred to as traumatic othematomas.
A peculiar lesion of this general character occurs occasionally in the
insane. If due to injury the latter is but trifling. It makes a conspicuous
tumor, involving usually the lower end of the auricle, and is known as
the othematoma of the insane. It is scarcely amenable to surgery, nor
does it often need it, but it constitutes a disfigurement which is not
only easily apparent, but diagnostic as to the cerebral or mental
condition.
The ear is the site of many neoplasms, both innocent and
malignant. Small papillomas are common, while fibrous tumors are
likely to develop, especially about the fibrocartilaginous lower end of
the auricle, where the ear has been pierced for ear-rings. Keloid
tumors, of still more conspicuously fibrous nature, are common about
the ear, especially among negroes. All innocent tumors may be
excised, through incisions which should be so planned as to leave a
minimum of disfigurement. (See Fig. 397.)
Of the malignant tumors epithelioma is perhaps the most frequent. It
pursues a course here similar to that which characterizes it elsewhere,
save that the dense structures of the cartilaginous ear yield but slowly
to its encroachment. The form known as “rodent ulcer” is slower here
than elsewhere. Fig. 396 illustrates a case under the writer’s care,
showing complete destruction of the external ear by a growth of this
kind, which had attained a degree and extent that did not permit of
successful treatment, and which eventually proved fatal. When
growths of this character have not progressed too far they should be
radically removed, the question of cosmetic effect being secondary to
that of their eradication. By a well-planned plastic operation much can
be done to atone for disfigurement resulting from radical operation.

Fig. 396 Fig. 397

Complete destruction of auricle by rodent Congenital lymphangioma of ear. (Lexer.)

ulcer. (Buffalo Clinic.)

FOREIGN BODIES IN THE EAR.

All sorts and descriptions of foreign bodies may enter the ear.
Young children have a tendency to introduce all kinds of bodies into
the ear, as into the nose, and sometimes intrude them to such a
distance that their removal is made difficult. Living insects make their
way into the meatus auditorius and even deposit their larvæ, which
may subsequently go through their developmental phases and fill the
passage-way with young insects. Among the inanimate materials
which children introduce are small buttons, pebbles, beans, peas,
beads, etc. Such a foreign body may not be at once discovered, and
some of those which easily undergo decomposition, like fresh
vegetable substances, may not be detected until they have set up
trouble by decomposition. Therefore it may be hours or days before its
presence is recognized. Sometimes it may be easily seen, again it
may be concealed. When the auricle is drawn upward and backward
the external meatus is somewhat straightened, and bodies within it are
more easily made visible, especially by reflected light. Therefore the
head mirror is usually required for their detection and removal. The
substance may be one which is easily seized and withdrawn, after
certain turning or shifting motions have been attempted, or it may be
impacted so as to offer considerable difficulties. It should never be
pushed farther in, for injury might thus be done to the membrana
tympani, and the effort should be to remove it with the least possible
damage to the lining of the canal. So essential is it to have the head
kept perfectly still during these maneuvers that it will be advisable,
with young children, to administer an anesthetic. Instances
occasionally occur which necessitate incision and liberation of the
auricle, with its deflection forward, and the consequent more complete
exposure of the auditory canal. Forceps of various fashions may be
used, or occasionally a blunt hook may be made with a probe, which
may be used to advantage.
Of living foreign bodies information can be obtained more promptly,
as the annoyance caused by their movements will at once disturb the
patient.
Relief has often been promptly afforded by filling the meatus with
water or glycerin as warm as can be borne, by which the insect is
killed, after which it may be removed by irrigation or by forceps,
assisted by good illumination.
That which is essentially a foreign body may be produced by an
accumulation of cerumen in wax-like form within the auditory canal.
Neglectful patients sometimes allow this to accumulate until it
constitutes not only a source of irritation but an obstacle to hearing. Its
removal is not ordinarily accompanied by difficulty, but requires
patience and often considerable effort, not only with instruments, but
with irrigation, especially with an alkaline solution, by which the waxy
substance is softened.
A phenomenon noted in many of these cases, where
instrumentation has to be practised within the vicinity of the middle
ear, is coughing or sneezing, sometimes to a degree which interferes
with the work to be done. This is a reflex to be explained through
connection with the pneumogastric nerve.

THE EXTERNAL AUDITORY CANAL.

In the fibrocartilaginous as well as in the more richly cellular portions
of this passage-way small phlegmonous processes frequently occur.
They give rise to an amount of suffering, and even of sympathetic
reaction, disproportionate to the extent of the difficulty. They are called
furuncles, or boils, sometimes occurring singly, often in groups. A
commencing process of this kind may be cut short by the use of an
ointment of 1 to 2 per cent. yellow sulphate of mercury, but after the
furuncle is well developed it is best treated by free incision, which can
be made with the freezing spray, and without much pain to the patient.
More extensive phlegmonous destruction, assuming even
carbuncular form, is occasionally met with in this region. There will be
more or less necrosis of tissue in such cases, which will require
removal, usually with the sharp spoon. These cases are not without
their danger, since the veins connect so freely with the interior of the
cranium.
Hyperostosis and exostosis produce either a narrowing of the
auditory canal or its complete obstruction, and sometimes even the
formation of an osseous tumor of considerable size. A thickening and
even new formation of bone may be the result of the chronic irritative
processes which frequently occur in the middle ear, but many of these
conditions occur in the newborn, in whom they are to be regarded as
congenital excesses and in whom they frequently cause permanent
impairment or loss of hearing. Some of the osteomas in this region are
of bone-like hardness, their density being sufficient to dull or even to
break the finest tempered steel instruments.
A small exostosis may be removed with the ordinary instruments of
the surgeon or the dental engine, but the larger and more dense
growths offer formidable difficulties for the operator and uncertain
results for the patient. When growths of this kind attain considerable
size they should not be attacked through the natural passages, but the
auricle should be separated and pushed forward and the auditory
canal opened.
 THE MIDDLE EAR.
The middle ear has for its external boundary the membrana
tympani, which, for clinical purposes, constitutes a limit beyond which
the general surgeon should not trespass, the structures within being
those within the field of the aural surgeon. Nevertheless the student of
surgery should realize that the membrane of the drum may be
ruptured in consequence of a blow upon the external ear, or perhaps
by the sudden condensation of air produced by explosions, etc. It may,
moreover, be lacerated in consequence of various injuries to the head,
basal fractures, etc., even those involving the opposite side of the
head; it may also be injured by foreign bodies, introduced usually from
without and through the canal. While this membrane has normally an
opening by which air pressure is equalized on either side, this seems
to play but a small part in the liability to or exemption from injury such
as just described. The membrane has its own blood supply, which can
become congested to a degree permitting considerable escape of
blood after laceration. It does not follow that bleeding from the ear is
necessarily an indication of basal fracture, after injuries of the head,
unless the hemorrhage is continuous and considerable, in which case
it may be stated that the injury must be deeper and more extensive
than one of the membrane alone. If, however, cerebrospinal fluid can
be detected as escaping with and diluting the blood, or escaping
independently, then the diagnosis of basal fracture may be regarded
as certain.
After such injuries as lead to hemorrhages from the ear the external
auditory canal, should be irrigated and protected against infection by
light tamponing, etc.
It is the writer’s opinion that the general surgeon should abstain
from operative intervention in the ordinary diseases of the middle ear,
save in the presence of symptoms which accompany mastoiditis,
acute infections of the sinuses, or even of the brain itself. When it
comes to an extensive operation, such as is often required in such
instances, including not merely opening of the mastoid antrum and
cells, but exposing the dura and judging of the condition of the sinus,
with perhaps the simultaneous ligation of the jugular in the neck and
washing out of the intervening portion, then these are measures
requiring such surgical judgment and operative skill that it would seem