Rory M. McDonald

Assistant Professor of Business Administration

Unit: Technology and Operations Management

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(617) 496-6938

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Rory McDonald is an Assistant Professor of Business Administration in the Technology and Operations Management Unit. He teaches the Technology and Operations Management course in the MBA required curriculum.

Professor McDonald’s research focuses on how firms innovate effectively in new technology-enabled markets. Drawing on in-depth fieldwork and archival data, he studies how executives develop viable strategies in these contexts and how they obtain resources that improve their chances of success. For his research on Internet companies, Rory received a Kauffman Foundation Fellowship in Entrepreneurship and was a finalist for best dissertation in Business Policy and Strategy by the Academy of Management.

Professor McDonald received his PhD in Management Science and Engineering from the Stanford Technology Ventures Program. He also holds an MBA and an MA in economic sociology from Stanford as well as two engineering degrees from the University of South Florida. Before joining Harvard, he was on the faculty of the University of Texas at Austin where he received the CBA Foundation Teaching award. Rory is on the board of YCG Funds, an Austin-based mutual fund company, and is an advisor to several startups.

Rory and his wife Anne live in Sudbury, MA with their four children. They are active in their church and enjoy a variety of family activities.

Publications

Journal Articles

  1. Exposed: Venture Capital, Competitor Ties, and Entrepreneurial Innovation

    Emily Cox Pahnke, Rory McDonald, Dan Wang and Benjamin Hallen

    This paper investigates the impact of early relationships on innovation at entrepreneurial firms. Prior research has largely focused on the benefits of network ties, documenting the many advantages that accrue to firms embedded in a rich network of inter-organizational relationships. In contrast, we build on research emphasizing potential drawbacks to examine how competitive exposure, enabled by powerful intermediaries, can inhibit innovation. We develop the concept of competitive information leakage, which occurs when firms are indirectly tied to their competitors via shared intermediary organizations. To test our theory, we examine every relationship between entrepreneurial firms and their venture capital investors in the minimally-invasive surgical segment of the medical device industry over a 22-year period. We find that indirect ties to competitors impede innovation, and that this effect is moderated by several factors related to the intermediary's opportunities and motivation to leak important information.

    Keywords: Competition; Intellectual Property; Innovation and Invention; Medical Devices and Supplies Industry;

    Citation:

    Pahnke, Emily Cox, Rory McDonald, Dan Wang, and Benjamin Hallen. "Exposed: Venture Capital, Competitor Ties, and Entrepreneurial Innovation." Academy of Management Journal (forthcoming). View Details
  2. Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets

    Rory McDonald, Eric L. Chen, Riitta Katila and Kathleen M. Eisenhardt

    Prior work examines competitive moves in relatively stable markets. In contrast, we focus on less stable markets where competitive advantages are temporary and R&D moves are essential. Using evolutionary search theory and an experiential simulation with in-depth fieldwork, we find that the relationship between performance and subsequent competitive moves depends on the type of market, not just on whether performance is high or low. High performers seek to maintain status quo, but this requires different strategies in different markets. They are conservative in established markets and bold in new ones. In contrast, low performers seek to disrupt the status quo. Again, this requires different strategies in different markets. Unlike high performers, low performers are bold in established markets and conservative in new ones where they lack understanding of how to disrupt rivals. Overall, our results incorporate unstable markets in theories of competitive dynamics and competitive interaction in theories of evolutionary search. By examining R&D moves, we also extend competitive dynamics research to include technology-based firms for whom temporary advantages are often essential.

    Keywords: Balance and Stability; Competitive Advantage; Supply and Industry;

    Citation:

    McDonald, Rory, Eric L. Chen, Riitta Katila, and Kathleen M. Eisenhardt. "Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets." Special Issue on The Age of Temporary Advantage. Strategic Management Journal 31, no. 13 (December 2010): 1527–1547. View Details

Working Papers

  1. Competition as Strategic Interaction

    Kathleen Eisenhardt, Rory McDonald and Cheng Gao

    Strategic interaction has been a topic of scholarly inquiry dating back to the 1960s. Drawing on several seminal examples, we explore the nature of the concept, comparing it to other forms of competition in strategy and organizations. Next, we organize and review the findings of three ostensibly separate theoretical perspectives that have arisen from game theory, competitive dynamics, and institutional theory—each with its own assumptions, constructs, methods, and findings—and we identify core insights about how firms compete against one another in established markets. Based on our evaluation, we argue that a promising research opportunity for strategy lies in exploring how firms strategically interact in new markets and which moves are most effective in these contexts.

    Keywords: competitive strategy; strategic interaction; competitive moves; institutional contestation; new markets; Research; Competitive Strategy; Emerging Markets;

    Citation:

    Eisenhardt, Kathleen, Rory McDonald, and Cheng Gao. "Competition as Strategic Interaction." Harvard Business School Working Paper, No. 15-067, February 2015. View Details
  2. Entrepreneurial Beacons: The Yale Endowment, Run-ups, and the Growth of Venture Capital

    Rory McDonald, Y. Sekou Bermiss, Benjamin J. Hallen and Emily Cox Pahnke

    This paper investigates the social context of entrepreneurship in organizational sectors. Prior research suggests that firm foundings are driven by collective patterns of activity—that is, by patterns of prior foundings, of support from related markets, and of institutional activism in a given sector. Building on research on social salience and signals, we consider the influence of singular sector-level triggers, which we call entrepreneurial beacons. We argue that the actions or outcomes of salient organizations attract and motivate entrepreneurs, thus increasing the rate of foundings. To test this logic, we examine the impact of the Yale University endowment’s investment choices and of venture-capital-backed IPO run-ups on venture-capital foundings between 1984 and 2011. The results pinpoint the aspects of the social environment that most heavily influence entrepreneurial activity and the dynamics of organizational sectors.

    Keywords: Venture Capital; Organizations; Economic Sectors; Entrepreneurship;

    Citation:

    McDonald, Rory, Y. Sekou Bermiss, Benjamin J. Hallen, and Emily Cox Pahnke. "Entrepreneurial Beacons: The Yale Endowment, Run-ups, and the Growth of Venture Capital." Harvard Business School Working Paper, No. 15-066, February 2015. View Details
  3. Competing in New Markets and the Search for a Viable Business Model

    Rory McDonald

    Prior research examines how firms compete effectively in established markets. This study investigates new markets, and traces how entrepreneurial rivals in such a market search for a successful strategy. Through an in-depth, multiple-case study of firms in the nascent online-investing market, we induce a theoretical framework to explain how firms win the race to find a viable business model. As the new market emerged, high-performing firms enacted three strategies in sequence that helped them achieve their objective quickly and efficiently. First, their executives focused primarily on substitutes but copied from rivals. Next, they actively tested their assumptions and made major resource commitments to the business model they identified as the most lucrative. Finally, they deliberately maintained a loosely structured organizational activity system in order to continue to accommodate emergent sources of value. For these firms, competition resembled neither economic rivalry nor collective action but a logic of interaction akin to parallel play. The resultant middle-range theory has implications for research on entrepreneurial competition in new markets and on the organizational processes of developing a business model.

    Keywords: Business Model; Market Entry and Exit; Competitive Strategy; Entrepreneurship; Financial Services Industry;

    Citation:

    McDonald, Rory. "Competing in New Markets and the Search for a Viable Business Model." Harvard Business School Working Paper, No. 14-088, March 2014. View Details

Cases and Teaching Materials

  1. HomeAway: Organizing the Vacation Rental Industry

    Rory McDonald, Feng Zhu and Cheng Gao

    In less than 10 years, cofounders Brian Sharples and Carl Shepherd had transformed HomeAway from just another Internet startup into the world's leading vacation-rental marketplace—a global online platform that links customers seeking vacation-home rentals to the property owners and managers who supply them. The case traces HomeAway's founding and acquisition-led growth, its 2011 IPO, and the core elements of its subscription-based business model. By 2014, incumbent travel giants like TripAdvisor and high-profile startups like Airbnb had begun to enter the vacation-rental sector. To stay ahead, HomeAway initiated a pilot cross-platform collaboration to list some of its properties on Expedia's site. More momentously, Sharples was also weighing a new commission-based revenue model that promised to attract a broader array of property listings but at the risk of undermining HomeAway's existing business.

    Keywords: strategy; innovation; entrepreneurship; technology; Acquisitions; operations management; Technology Platform; Acquisition;

    Citation:

    McDonald, Rory, Feng Zhu, and Cheng Gao. "HomeAway: Organizing the Vacation Rental Industry." Harvard Business School Case 615-036, December 2014. View Details
  2. AmazonFresh: Rekindling the Online Grocery Market

    Rory McDonald, Clayton Christensen, Robin Yang and Ty Hollingsworth

    More than a decade after the high-profile failures of several early online grocers, grocery remains the largest single U.S. retail category and one of the few that has not yet migrated online. Amazon began testing its grocery-delivery service, AmazonFresh, in Seattle, in 2007; five years later, the company has made significant progress. The case traces the evolution of AmazonFresh's business model and describes the operating capabilities necessary to compete with brick-and-mortar supermarkets like Wal-Mart and Safeway and with new digital grocery startups. Now Amazon needs to decide on AmazonFresh's next step. Should the company continue refining its business model in Seattle or expand to another city? What factors should it take into account when planning its next move?

    Keywords: innovation; strategy; competition; new markets; learning; grocery; operations strategy;

    Citation:

    McDonald, Rory, Clayton Christensen, Robin Yang, and Ty Hollingsworth. "AmazonFresh: Rekindling the Online Grocery Market." Harvard Business School Case 615-013, July 2014. (Revised August 2014.) View Details

    Research Summary

  1. Overview

    by Rory M. McDonald

    Professor McDonald studies how firms successfully navigate new markets. He examines how widely accepted strategic prescriptions can actually undermine managers’ attempts to develop a viable business model or stake out a defining new market position, and considers the important role played by entrepreneurial resource providers in these processes. Empirically, he relies on a complementary range of methodologies – in some instances solving problems deductively through quantitative analysis of archival data, complemented by fieldwork while in other instances adopting an inductive approach that draws on structured interviews and field research to generate new insights.
  2. Competing in New Markets

    by Rory M. McDonald

    Strategic advisors counsel managers to conduct a thorough competitive analysis emphasizing key points of differentiation. But for new markets, Professor McDonald’s research suggests that reports of the threat posed by similar rivals may be greatly exaggerated, and managers may be well-advised to focus on substitutes, using rivals as mere stepping stones to speed their own progression and keep costs low. Similarly, while popular media accounts laud market ‘evangelists’ who open up new market space through symbolic acts of persuasion, McDonalds’s research argues that successful innovation in new markets resembles problem-solving more than missionary work, and suggests that managers may be better off riding the coattails of these hardworking evangelists to establish a defining position in the new market.

  3. Entrepreneurial Resources

    by Rory M. McDonald

    Mounting evidence suggests that ventures’ early relationships are critical for their success by helping overcome initial resource constraints, improve internal operations, and gain access to diverse audiences such as potential investors, the media, and customers. But which providers should managers engage? In collaboration with researchers at London Business School, Columbia, and the University of Washington, Professor McDonald examines the value created (and sometimes destroyed) by venture capitalists, super angels, and other resource providers.

    Teaching

  1. Overview

    by Rory M. McDonald

    Technology and Operations – MBA Required Curriculum This course enables students to develop the skills and concepts needed to ensure the ongoing contribution of a firm's operations to its competitive position. It helps them to understand the complex processes underlying the development and manufacture of products as well as the creation and delivery of services. http://www.hbs.edu/faculty/units/tom/Pages/curriculum.aspx
  1. Finalist for the 2013 Wiley Blackwell Outstanding Dissertation Award from the Academy of Management, Business Policy and Strategy Division for his dissertation entitled, “Competition and Strategic Interaction in New Markets.”

  2. Winner of the 2013 Trammell/CBA Foundation Teaching Award for Assistant Professors at the University of Texas at Austin, McCombs School of Business.

  3. Received a 2010-2011 Gerald J. Lieberman Fellowship from Stanford University.

  4. Received a 2008-2010 National Defense Science & Engineering Graduate Fellowship.

  5. Received a 2009-2010 Kauffman Foundation Dissertation Fellowship.