Final answer:
A joint venture is less risky than direct investment as it involves the pooling of resources and sharing of risks, whereas direct investment requires a company to fully establish its own operations in a new market, thus carrying higher risks and costs.
Step-by-step explanation:
A joint venture is considered less risky than direct investment. When a company chooses direct investment as their market entry strategy, they make a full-fledged entry into a new market by investing substantial capital in the foreign location to set up their own operations. This includes building new facilities, establishing a new supply chain, hiring staff, and navigating new regulatory environments. Direct investment carries a higher risk because the company assumes all the responsibilities, costs, and potential losses. In contrast, a joint venture involves two or more entities pooling their resources to undertake a specific project or create a new business entity on a shared risk basis. While joint ventures allow for shared control and profits, they also share the risks, making them less financially burdensome and risky than going it alone with direct investment.