Under what economic conditions should a business invest in growth vs build its reserves?

Under what economic conditions should a business invest in growth vs build its reserves?_____________________________________________________________
This is a really difficult question, on several levels. Ownership and management structure/control, size, overall economic conditions, competitive environment, technological position and current financial status will all interact to impact that decision process. Generally, reserve building, by nature, is conservative. You normally build reserves in anticipation of income or revenue shortfalls. This is different from building reserves for planned capital expenditures (normally for growth, not replacement of P&E).
There is always a reserve baseline that firms plan for and the amount/percentage varies by industry. Beyond that, again, excluding P&E planning, reserves are built in anticipation of stagnant or relatively low growth prospects and a decision to execute a buyback strategy, acquisition (should we call that growth?) or an increase in dividend payouts.
In a projected short term economic downturn, reserves should be built (if the forecasters are right) as a temporary cushion but, would not be a fundamental strategy. Those reserves would normally be spent during the downturn to improve relative competitive advantage in the industry.
In summary reserve building, beyond the most basic level, is a techniques that is defensive and an indication that management has no confidence in their capability or the prospects of its industry.