Coyle was reportedly the Hoops' number one target to succeed Gordon Strachan in the managerial hotseat at Parkhead but left for his summer holiday more than a week ago poised to sign a new two-year contract at Turf Moor.
Despite being a boyhood Celtic fan, it appears the prospect of leading Burnley in their first top-flight season for 33 years has proven greater a lure for Coyle than managing one of the biggest clubs in Europe.
It was ever thus, according to former Parkhead striker McAvennie, who left the club in 1989 to rejoin West Ham.
"Everyone gets so one-sided up here and so blinkered," he said.
"It's a big world out there and the Premier League's the best league in the world.
"Owen's now got into the Premier League. Why would he want to come up here?"
McAvennie spent four years in England - one of them in the Premier League - before returning to Celtic in 1993.
He can see Coyle eventually wanting to take charge of the club but not before he has tested himself against the cream of the English game.
"I played for a year in the Premier League before I came back to Celtic so I'd done what I wanted to do and proved that I was good enough," McAvennie said.
"Owen has beaten Chelsea at Stamford Bridge in the Carling Cup, he beat Tottenham, he's beaten Arsenal.
"There's no reason why he doesn't want to pit his wits against them every week.
"Celtic's a massive club, one of the biggest in the world. But they're not in the biggest league in the world and that's the problem."
West Brom's Tony Mowbray is now the overwhelming favourite to be named Hoops boss, with reports claiming compensation is now the only stumbling block to his appointment.
Celtic have so far refused to confirm whether Mowbray is their number one target, while West Brom have repeatedly insisted no official approach has been made for their manager, who has two years remaining on his Hawthorns contract.
But that has not quelled speculation over the amount of compensation it would take to land the former Hoops defender, with figures ranging from £850,000 to £2million.
McAvennie, who was a team-mate of Mowbray's at the club in the mid-1990s, backed him to get them playing the kind of football that will have fans' mouths watering again.
McAvennie believes the Baggies were only a regular goalscorer away from staying up and does not see Mowbray having the same problem at Celtic.
He said: "I think Tony will get the ball down. The fans love to see fast-flowing football and I'm looking forward to it.
"But wait until he signs first. Knowing Celtic, it could change by the hour."