No a historian, but a classical philologist: You are likely referring to the "Linear B" inscriptions. Linear B was used in the second millennium BC in Mycenaean Greece. The only inscriptions we have left are basically inventory lists ("Seven amphoras of oil from that place, five amphoras of oil from this place, two horses from this place...") from the palaces, i.e. the centers of power. The were written on clay tablets, which are a good reusable writing material because if you make them moist again, you can just wipe out what you wrote. Whether there was literature in the stricter sense is unknown - we lack sources.

However, around 1200 BC, something catastrophic happened in the eastern Mediterranean. All the advanced civilizations (Mycenae, Hittites etc.) collapsed within a relatively short time, except for Egypt. There is an Egyptian source mentioning "sea peoples", suggesting some kind of hostile invasion/plundering. The Mycenaean palaces burned down, which actually is the reason those clay tablets survive (clay gets hardened and thus conserves the writing).

This affected life in Greece, and led to less trade and wealth. An inventory system (i.e. Linear B writing) is not useful anymore in these circumstances, so the Greeks did not just abandon their writing system, they abandoned literacy altogether. When they started writing again a couple of centuries later, no one knew about Linear B anymore, so they had to take it from elsewhere. Again, writing was at first used in trade, and the Phoenicians did a lot of trading, so you see why they got their scripture from them.

Moreover, Linear B is written in syllables, which is not really adequate for Greek. E.g. "horse" - hiqos in Mycenaean Greek - had to be written as i-qo due to the constraints of the writing system etc.