Spurs were in advanced talks with Conte over the managerial role at the club, but he was not offered the job last week.
It has been claimed that Tottenham chief Levy was concerned about the demands made by Conte, who was fresh off leading Inter to the Serie A title in the season gone by.
Ex-Spurs star Murphy has insisted Levy made the right move in calling off talks with Conte, if he demanded financial backing beyond what the club are capable of giving him at present.
Murphy added that Spurs need money in the region of £300m, £400m to reach somewhere near their rivals in the likes of Manchester City and Chelsea, which they simply do not have at the moment.
“My feeling would be that Daniel Levy or Tottenham should not be held over a barrel by anyone”, Murphy said on talkSPORT.
“How can you demand more money than they are actually earning?
“I mean how much money would anybody has to have to try and compete with Manchester City, Liverpool and Chelsea next season.
“You need what £400m, £500m to get Tottenham somewhere near, probably £300m to £400m, and they are simply not going to give him that.
“So, it depends on his demands, if they were ridiculous then yes get him out of the door and get somebody that is going to work under the restrictions that Tottenham have
“You cannot build an empire overnight unless you have a new owner come in from Saudi or wherever he has got billions of pounds, who can then compete overnight, otherwise the whole thing falls down.
“So, if he was in there being stupid, yes Daniel is right, next one.”
Spurs are continuing their efforts to find a new man in the dugout, with former boss Mauricio Pochettino among their candidates.