All this blogosphere chatter on ‘Hackathons’ inside companies makes it appear that this is a new idea.
For the record, the earliest note I have for such a thing was at NeXT software. They had a thing called “Small Apps Week”. I think the name pretty much says it all, and this was back in the late 1980’s… 20 years before.
I bet there were probably other companies that did similar things even earlier.