In fact, as I have mentioned in previous articles, I work with a significant number of law firms in California who will not consider any lateral candidate who is not already licensed in California.  There are a number of reasons for this, including but not limited to: 1) the firm does not want to pay the expense of bar exam fees, not to mention having an associate unavailable for a couple weeks post-hire in order to study for and take the exam; 2) for any litigators, you will not be able to represent clients in court without being locally licensed, and this creates logistical hassles for the partners; 3) becoming licensed locally is an indication you have seriously invested in the local legal market, and are more likely to stick around (this is especially true of lateral moves involving a change in geography); and 4) it looks better to the firm’s clients, and at the end of the day, everything comes down to the clients.