5.4. Independent variables
Following the BTF literature, we measure past performance of the focal firm relative to its industry peers (Bromiley, 1991; Greve, 2003). This approach is the most appropriate because strategic actions target competitors in the industry, and managers themselves are often assessed against peer groups of managers. Following Ferrier (2001), we measure relative market share performance by the deviation of the focal firm's change in market share (from 2008 to 2009) from the change in industry median (from 2008 to 2009), using the median market share in the industry as the relevant reference point. Following Ferrier (2001) and Lant, Milliken, and Batra (1992), relative financial performance is based on accounting data — return on total assets. Specifically, we measure return on total assets by the deviation of the firm's ROTA from the industry median in 2009. Both measures were calculated using data from the Oriana and Osiris databases, and lagged by two years to account for the fact that firms would need time to plan and implement after obtaining information of their previous performance.