Final answer:
Foreign direct investment (FDI) requires the most equity and carries the greatest risk due to its long-term focus and managerial responsibility. Portfolio investment, on the other hand, involves less equity and is easier to withdraw quickly.
Step-by-step explanation:
The mode of foreign market entry that requires the most amount of equity and therefore creates the greatest risk is foreign direct investment (FDI).
FDI involves the investor purchasing more than ten percent of a company and assuming some managerial responsibility. This type of investment tends to have a more long-run focus. It requires a significant amount of capital and carries a higher risk due to the commitment involved. For example, if a U.S. firm wants to buy or sell a company in another country, planning and carrying out the transaction may take several weeks or months.
On the other hand, portfolio investment involves the client purchasing less than ten percent of a company and is often made with a short-term focus. It is easier to withdraw portfolio investments quickly compared to FDI. For instance, a U.S. portfolio investor who wants to buy or sell foreign government bonds can do so with a phone call or a few computer keyboard clicks.