Recent theories of economic growth treat commercially oriented innovation in response to economic incentives as a major engine of technological progress and Economic growth. Therefore this study tries to determine rate of return of Physical investment and R&D expenditure on economic Iran in during 1968-2009. Finding provided empirical evidence that Labor, Physical investment and R&D expenditure have important and significant effects on economic growth performance. Our estimates suggest that the coefficient of physical investment on economic growth is larger than the of R&D expenditure. As compared with impact of physical capital, the impact of R&D investment on economic growth in Iran is not as strong as, through the lower estimated elasticity values. These results indicate rate of return R&D investment in economic of Iran is much higher than those of physical investment which explains the relatively active R&D investment as compared with physical investment during this period. The short run of internal the average rate of return of physical investment and R&D investment estimated are .47 and 3.95 respectively. The long run of internal moreover the average rate of return of physical investment and R&D investments estimated are.84 and 66.2 respectively.