To generate terahertz radiation via the electron cyclotron maser instability, harmonic interactions are essential in order to reduce the required magnetic field to a practical value. Also, high-order mode operation is required to avoid excessive Ohmic losses. The weaker harmonic interaction and mode competition associated with an over-moded structure present challenging problems to overcome. The axis-encircling electron beam is a well-known recipe for both problems. It strengthens the harmonic interaction, as well as minimizing the competing modes. Here, we examine these advantages through a broad data base obtained for a low-power, step-tunable, gyrotron oscillator. Linear results indicate far more higher-harmonic modes can be excited with an axis-encircling electron beam than with an off-axis electron beam. However, multi-mode, time-dependent simulations reveal an intrinsic tendency for a higher-harmonic mode to switch over to a lower-harmonic mode at a high beam current or upon a rapid current rise. Methods are presented to identify the narrow windows in the parameter space for stable harmonic interactions.