Sluggish investment, crisis and firm heterogeneity.

This article examines the stagnation of capital investments during the Great Recession, arguing that the flattening of aggregate investment is driven not by a uniform decline in firms’ propensity to invest but by increasing heterogeneity in investment behaviors. Using data from Italian manufacturing firms between 2004 and 2018, the study identifies two key factors explaining this heterogeneity: the diversity of corporate strategies—distinguishing firms competing primarily on cost from those focusing on quality—and managerial discretion in allocating financial resources during the recession, characterized by choices to either "retain and reinvest" or "downsize and distribute" earnings. Empirical analysis shows that firms with quality-oriented strategies and upgrading managerial responses are more likely to increase investments, while cost-focused and downgrading firms tend to divest, resulting in a polarization that cancels out at the aggregate level. The findings suggest that policy measures to stimulate investment should account for firm heterogeneity and promote selective support tailored to different strategic and managerial profiles.