Social network research has begun to take advantage of fine-grained communications regarding coordination, decision-making, and knowledge sharing. These studies, however, have not generally analyzed how external events are associated with a social network’s structure and communicative properties. We study how external events are associated with a network’s change in structure and communications. Analyzing a complete dataset of millions of instant messages among the decision-makers in a large hedge fund and their network of outside contacts, we investigate the link between price shocks, network structure, and change in the affect and cognition of decision-makers embedded in the network. When price shocks occur the communication network tends not to display structural changes associated with adaptiveness. Rather, the network “turtles up”. It displays a propensity for higher clustering, strong tie interaction, and an intensification of insider vs. outsider communication. Further, we find changes in network structure predict shifts in cognitive and affective processes, execution of new transactions, and local optimality of transactions better than prices, revealing the important predictive relationship between network structure and collective behavior within a social network.
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